Real Estate Market Value
Market value is best explained as:
“A price that a willing, able and knowledgeable, seller and buyer agree upon.”
The Crown 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 no 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 let discuss Market Value as it relates to single family homes:
A price that a house will sell for within a reasonable time frame between willing and able parties that have reasonable knowledge of the market.
1. Defined Property
2. Price and Condition
3. Time Frame (average markets run about 60 days)
4. Willing, Able and Knowledgeable Parties
The following will help you establish market value by analyzing each of the components above.
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 assess 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 60 day average selling period. Since most buyers are looking for the best home they can find for their money, homes in great condition sell fairly fast. 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 costs 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. When a house attracts fewer buyers, it takes longer to sell the house. 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.
Note: Most buyers that are willing to purchase a home in poor condition want a substantial amount reduced from the price of the home, for the time and effort it will cost them to effect the needed repairs.
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 too high for it’s location and or condition. Conversely if a home sells within one to two weeks, the price was probably too low. Even perfect homes will not sell within this time frame if the price is too high.
Willing, able and knowledgeable parties:
A willing buyer and seller… no one held a gun to the sellers 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 purchase.
Knowledgeable parties… Assumes that both parties have a reasonable knowledge of the current market.
Ask below or Call The Crown Team at 866-612-8975