Property Asking Price Vs Property Market Value
In real estate, many landlords meet the difficulty to understand that there is a big difference between an asking price or advertising price and the market value of a property, as a result to fall into the trap of staying in the market for long time without efficiency. Most often, the factor that leads to a successful property sale within a normal time period (30 – 100 days) is the efficient marketing in combination with the right asking price.
How the right asking price is defined? For sure here we need the support of an experienced property professional like the DemPro team where we will help you to understand the potential of your property by using the right information related to the current market trend and of course the market value of the property. Additionally, we can provide you an official property evaluation report – survey where can be used for a court case or for any other usage that is necessary to present an official property evaluation report.
What if someone asks: Do the special features / characteristics of the property affect the market value of a property positively? Yes, it does, but always within a logical range.
Is it true that a property sells just because of price? What about the value component?
Well, we all can agree that there needs to be an exchange of goods in order for a sale to occur. However, the buyer and seller might not rate value equally. When we market a client’s property, we determine a market price with viewing the property and the probability of that property being sold in 30, 60 or 90 days based on comparable and market data that can prove our opinion. All the property features / characteristics, the condition, the market performance of the area, the rental yielding potential plus the market trend.
How the asking price and market value they can influence each other.
Asking price is what a willing, ready to sell property owner want for a property regardless what the potential buyer is willing to pay for it. Usually we meet property owners that they are asking for prices where they calculate by taking prices from estate agents websites and they are expecting for something similar or higher…where is not right.
The transaction that takes place determines the market price, which will then influence the market value of future sales. Price is determined by local supply and demand, the property’s condition and what other similar properties have sold for without adding in the value component.
Market value is an opinion of what a property would sell for in a competitive market based on the features and benefits of that property (the value), the overall real estate market, supply and demand, and what other similar properties have sold for in the same condition.
The major difference between market value and asking price is that the market value, in the eyes of the seller, might be much less than what a buyer will pay for the property or it’s true market price. Value can create demand, which can influence price. But, without the demand function, value alone cannot influence price. As supply increases and demand decreases, price goes down, and value is not influential. As supply decreases and demand increases, the price will rise, and value will influence price. Market value and asking price can’t have a big difference.
However, buyers and sellers can view value differently. A seller might feel that their in-ground pool is a benefit, but the buyer could see it as a negative and place less value on the property. Or the seller could feel the new roof they put on the house has great value, however, the buyer places no value on this because they expect the property to have a roof in good condition. Or a builder might feel he has superior quality and demand a higher price, but the buyer places less value on quality and more value on the lot, neighborhood and floor plan of the property.
Value is not 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 supermarket / bus stop. Or the property could be close to a school or close to the beach for someone who has kids or wants to use the property as a holiday home.
The question is, “How much is that worth to a buyer and what is the lower accepted price of a seller?” as there is always a limit to what a buyer will pay and a seller will accept to sell. Here is the time where experienced estate agents needed in order to help both sides to conclude to a fair selling price where will be the market value for similar properties in the future.