Incentives, Concessions, Tax Credits and Tax Abatements
By: James R. MacCrate, MAI, CRE, ASA
In the current unstable real estate market, we hear reports from the National Association of Realtors and many economists that the real estate residential housing market is stabilizing. This is based on several factors including recent price increases in several metropolitan markets, an increase in pending contracts of sale, and increase in overall residential market activity. This may very well be a temporary illusion that has been caused by an increase in incentives, concessions, and the federal tax credit. The Wall Street Journal reported that Toll Brothers, Hovnanian Enterprises and Lennar Corporation have provided below market financing and other incentives to increase the number of sales. If adjustments are made to the transaction prices for these incentives, concessions and federal tax credit, one would clearly see that the market value as defined by the Uniform Standards of Professional Appraisal Practice has not really increased at all.
The typical definition of market value as defined in appraisal reports for federally regulated institutions is summarized as follows: Read more…
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