The logic for the N-CAP’R Assessed Value application is based (among other things) on recognition of the following market supported, real life factors: Assessed Value is typically defined in terms of (or related to) Market Value. Market Value is value to a typical investor. The typical investment real estate transaction involves some combination of mortgage and equity funding. In terms of investment acquisition funding, the investment real estate market is composed of (at least) two broad segments – the Investor Segment and the Lender Segment. Loan-to-value ratios for investment real estate transactions are typically higher than equity-to-value ratios. For the typical investment real estate transaction – current market lending criteria has a significant (and often the greatest) influence upon virtually all (market equivalent) income and value related ratios. For example, this application can clearly demonstrate that a change in current market – mortgage interest rates, loan-to-value ratios, debt coverage ratios, amortization and/or other lending terms, will result in changes of indicated value, overall capitalization rate, equity dividend rate, equity yield rate, and other income-value related ratios. A comprehensive income capitalization analysis should consider all reasonably available pertinent data – including those data from the Lender Segment of the market as well as those from the Investor Segment of the market.
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