MARKET VALUE
Market value is best explained as: A price that a
willing, able and
knowledgeable, Seller and Buyer agree upon.
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Many Sellers and some real estate
agents do not have a grasp of Market Value and that is evident in
the price you see some homes priced at. When asked how the
price was arrived at the answer is "that's what I need" or "that's
what the Seller wanted".... The Mc & Mc Team feels the meaning of market value can be confusing because it does not mean the same to all people at all times. Homes are bought and sold throughout the year sometimes with varying prices. Whenever consumers are purchasing homes, market value is established. When there are no sales there can be no established market value. As an example: A Seller may put a home up for sale and on one |
| purchases it (no market value). In order to induce a sale, the Seller reduces the price and sells the home (market value established). |
So lets dissect Market Value as it relates to single family homes:
A price that a house will sell and within a reasonable time frame between willing and able parties that have reasonable knowledge of the market.
Components:
The following will help you establish market value by analyzing each of the components above.
Defined Property:
When
you attempt to establish market value, keep in mind that you are estimating the
value of a defined property. The location of this particular property is
your starting point for the complete investigation. An exact same property
in another city, or even on the other side of the same city, is not relevant to
this investigation (location, location, location).
Home prices fluctuate and vary substantially from town to town, city to city and neighborhood to neighborhood. Therefore when you establish a market value for one defined property, it must be compared with homes that are similar and within the same or nearby neighborhoods of comparable homes.
Price and Condition:
You will need to asses the condition of the defined property. The
condition determines the amount of interest there will be in purchasing the
property. The amount of interest will effect the time and the amount of
time will have a positive or negative effect on the price to keep within the 100
day average selling period. Since most Buyers are looking for the best
home they can find for their money, homes in great condition sell faster.
Homes that are in need of repair or show poorly can take an immense amount of time to sell.
A common comment we hear from Sellers is: We'll subtract the estimated repair cost from the price of other sold homes. This is not an accurate or acceptable way of determining market value. Very few Buyers are willing to buy a house that's not in good condition. So in order to attract more Buyers the price must be reduced by much more than the mere cost of repairs. A good rule of thumb is two times the estimated repair costs, minimum. Click Here:
Time:
In an average or normal real estate market, a properly priced home will
sell within one to three months. Homes that do not sell within that time
are not sold for one reason and one reason only...the price is to high for it's
location and or condition. Conversely, if a home sells within one or two
weeks, the price was probably to low. Even perfect homes will not sell
within this time frame if the price is to high.
Willing, Able and Knowledgeable Parties:
A willing Buyer and Seller...no one held a gun to the Seller's head.
Able Buyer and Seller...the Seller has clear title and is capable of
legally transferring title and the Buyer has the means of facilitating the
purchasing.
Knowledgeable parties...assumes that both parties have a reasonable
knowledge of the current market.
