Market price

The difference between the market price and the market value of real estate

In real estate, many agents suggest that it all comes down to price. Is it true that a property sells only because of the price? What about the value component?

Well, we can all agree that there has to be an exchange of goods for a sale to take place. However, buyer and seller may not assess value in the same way. When I market a client’s property, I determine a market price without seeing the property and the likelihood that that property will sell in 30, 60, or 90 days based on comparables and market data. Then I determine a market value after consulting and evaluating all the benefits, property condition, and external market data.

Let’s take a look at the differences between market price and market value and how they can influence each other.

Market price

The market price is what a willing, loaned, bank-qualified buyer will pay for a property and what the seller will accept for it. The transaction that takes place determines the market price, which will then influence the market value of future sales. The price is determined by local supply and demand, the condition of the property and the price at which other similar properties have been sold without adding value.

Market value

Market value is an opinion of the price at which a property would sell in a competitive market based on the characteristics and advantages of that property (value), the overall real estate market, supply and demand, and price. to which other similar properties have been sold in the same condition.

The main difference between market value and market price is that market value, in the eyes of the seller, can be much more than what a buyer will pay for the property or its true market price. Value can create demand, which can influence price. But, without the demand function, value alone cannot influence price. As the supply increases and the demand decreases, the price decreases and the value has no influence. As supply decreases and demand increases, the price will increase and the value will influence the price. Market value and market price can be equal in a balanced market.

However, buyers and sellers may see value differently. A seller might think their inground pool is an advantage, but the buyer might see it as a disadvantage and place less value on the property. Or the seller might feel that the new roof he has put on the house is of great value; however, the buyer places no value on it because they expect the property to have a roof in good condition. Or a builder may think they have a higher quality and demand a higher price, but the buyer places less importance on quality and more value on the land, neighborhood and floor plan of the property.

Value isn’t always about bricks and mortar. Some buyers might pay more for a property based on personal, value-added items. For example, Buyer A, who does not drive, values ​​a property higher than Buyer B because the property is next to a bus line. Or the property could be close to a school or a doctor’s office for someone with children or a health problem.

The question is “How much is it worth to a buyer?” Because there is always a limit to what a buyer will pay and how much the property will be appraised by a bank. The value is really in the eye of the beholder. Some buyers might see the property’s value but might not pay more if there is no demand. In most cases, the market price will outweigh a buyer’s market value.

Is price the determining factor in the sale of a property, and can price alone overcome any objections a buyer has about a property?

I believe in a buyer’s market, or even a neutral market, price alone can overcome most objections. In a buyer’s market, where demand is weaker, buyers will wait for the right deal.

The economic downturn of the past has made buyers more careful about their money and how they spend it. Buyers are more careful and take longer to decide. I have found the price to be a major motivator. If a property needs repairs, a homeowner can lower the price to attract buyers who see the property’s value.

Price levels the playing field. I work with many buyers who might not like a particular feature of a property, but will overlook that “negative” feature if the price is right. Think about it, every property ultimately sells for market price. Even properties with power lines behind them or next to railroad tracks, near a graveyard, that are haunted, have a backyard swamp, or those with less good construction all end up selling. .

Some would argue that factors such as sales techniques, marketing, increased exposure and staging can add more value and increase demand, which will cause the market price to rise.

A house doesn’t sell – or does it?

That’s an interesting point, because most products need a boost to sell – a boost from a brand, sales, and marketing perspective. However, in real estate, most consumers looking in a particular area and price range know what properties are for sale and can quickly determine the price and value using the internet.

In my opinion, marketing is a function of price. Good marketing with the right message will drive more traffic to the property. But when buyers can touch and smell the property, the property must “sell” to some extent. Realtors, marketing and even home staging can help bring these buyers to the property and spark their interest; Ultimately, however, the home must stay within the buyer’s budget and offer value, and the house must “sell itself”.

So, is price the only reason houses sell? You decide. I think price combined with effective marketing is the biggest motivator to sell a home in any market, especially a buyer’s market. When it comes to a sellers’ market, you can strategically price a home to exceed the asking price. But, in the end, a buyer will only pay what he is worth and the buyer has the checkbook.

Is price the only reason houses sell? Please continue the discussion in the comments section below.

Robert McTague is the team leader of CNY Agent Team from RealtyUSA in Syracuse, New York, where he simplifies the buying and selling process and provides marketing, coaching and speaking support.

Email Robert McTague.