Chapter 1: Appraisal Terminology - 45 -
conditions. Therefore, the appraiser must consider the subject property within the correct
market context.
The four markets (i.e., the four “levels of trade”) commonly used by the appraiser are:
• Retail market. A retail market is the market in which items are sold at retail, i.e., to the
“end user.” The end user is one who does not purchase for resale—at least not in the
property’s “current form.” Examples of retail markets include discount stores, antique
shops, art galleries, jewelry stores, consignment shops, department stores, etc.
o Current form. In the retail market, goods are sold to the end user who retains
the property without the intent of reselling the item—at least not in its current
form—but may resell if the “form” is changed. As an example, an automotive
junk yard is the retail customer for a junked car because the yard does not
typically resell the junked car as-is. They resell the parts (and in doing so they
changed the “form”), but not the vehicle itself. Thus, the junk yard is a retail
buyer of junked cars. In a similar manner, a used bookstore is a retail buyer for a
very large number of used books because the bookstore would not typically resell
the “lot.” Instead, they would break up the collection and resell it piecemeal, i.e.,
in a different “form.”
• Wholesale market. A wholesale market is the market in which wholesalers sell to the
trade (i.e., to those who purchase with the intent of reselling the property in its current
form). Antique dealers buy from the wholesale market for resale to the public.
• Orderly liquidation market. An orderly liquidation market is the market in which
property is regularly sold in an orderly and advertised fashion but for which nominal but
adequate time constraints apply, i.e., there is reasonable exposure time. Examples of an
orderly liquidation market include auction galleries, on-site auctions, and estate tag sales.
• Forced liquidation market. A forced liquidation market is any market in which property
is sold quickly, within a very restricted exposure time frame, and often without regard to
the most appropriate (i.e., most lucrative) marketplace. A short-notice auction of the
contents of a storage unit at a local self-storage facility is an example of a forced
liquidation market. The “give-away” prices adopted to entice a sale in the concluding
hours of an estate or yard sale is another example of a forced liquidation market.
Appraisers must make use of the most relevant level of trade, i.e., the market that best reflects the
type and definition of value being developed by the appraiser which, in turn, is based on such
issues as the intended use of the appraisal, the needs or requirements of the client or other
intended users, or, perhaps, on markets mandated by law or regulation, such as by IRS regulations
which require the use of the market “in which retail sales most commonly occur to the public.”
Market Level
The Comment to Standards Rule 7-3 of USPAP states:
In the context of personal property, highest and best use may equate to the choice of the
appropriate market or market level [emphasis added] for the type of item, the type and
definition of value, and intended use of the appraisal.