Home Buying in 64468>Question Details

Steve Thomps…, Home Buyer in 64468

What determinres Market Value?

Asked by Steve Thompson, 64468 Sun Oct 7, 2007

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All the answers are great! Since you have already gotten all the text book answers, I am going to give you an answer from another angle.

However the bottom line is, like everything else, supply and demand really determines the Market Value.

All the comps can do is to give the seller a guideline on where to start; once the price is set, we have have to watch very closely what the market truly is, how much supply and demand are there for the same kind of property in the immediate area.

The house can be priced wit the most accurate comps; but it won't do any good unless there happens to be a buyer for that property at that specific time. If not, then the house won't sell. This is one of the reasons why Realtors will suggest the sellers to lower the price after a while, may or may not be the fact that the house is not worth the list price, but it allows a larger pool of buyers to come in and look at the house; where we might increase the demand.

After that, and if the house sells, the new price might become the new market price for similar property at that time.

Sylvia
1 vote Thank Flag Link Sun Oct 7, 2007
Sylvia Barry,…, Real Estate Pro in Novato, CA
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Great answer by Angela. I noticed that she did not dwell on upgrades; She gave the 3 houses a range of 200K to 212K. Sometimes these types of price differences within a range are due to upgrades, sometimes they are due to other factors (such as condition, location within the subdivision, lot size) which affect the value within the value range.

Where upgrades lose their oomph is when they stray too far out of the range for similar houses. While the 212K house may have had 12k in upgrades to make it worth that much more than its 200K brother, a house with $40,000 in upgrades is unlikely to add anywhere near that much value in comparison to its peers.

Oh the 12 month period is the oldest you could go. - The Realtor and you must give highest weight to the very most recent closed sales, then to older sales, pending sales, and then current active listings. You would reach back 12 months only if there was insufficient recent activity to support a value estimate.
2 votes Thank Flag Link Sun Oct 7, 2007
Jim Walker, Real Estate Pro in Carmichael, CA
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Market Value is most traditionally determined by taking recent sales (within the past 12 mos), from comparable properties in the same particular area or subdivision (within 1 mile if there is no subdivision). Say there have been three homes to sell in your neighborhood in the past 12 mos, all with approximately the same sq. footage, the same approx age, the same features (pool/2 car garage etc), and similar condition.....Lets say home A sold for $200,000, home B sold for $212,000 and home C sold for $206,000. You can pretty much at a glance determine a market value ranging from $200K to $212K...If you want a more specific value determination, a Realtor can do a Comparative Market Analysis which will narrow down that range based on specific plusses or minuses when compared to those recently sold properties.

Having said that, there are also times when an area becomes "HOT" in which homes sell for more regardless of the past sales simply because of buying demand...Market Value can also be loosely used to mean what buyers are willing to pay for homes in that area regardless of the documented value. This is why determining a home's value in any capacity is referred to as an "art" and not a science!

Just remember that Market Value is not to be confused with "Assessed Value" (which is what the property appraiser for your county uses to determine taxable value and can be greatly unreliable for many reasons), or "Appraised Value" which used 2 other methods in additon to the comparative sales method to make its determination.
2 votes Thank Flag Link Sun Oct 7, 2007
Market value is based on the "sold" price of comparable properties ( what buyers will pay. ) With current market conditions, I wouldn't use comps more than 3-4 months old. A comp is a comparison property that is similar to the property you are placing a value on. Consider age, square footage, condition, ammenities, location, size of parcel, views, water, etc. A realtor has easy access to this information.
1 vote Thank Flag Link Sun Oct 7, 2007
Market value is determined by what buyers are willing to pay. That's why we look at recent comparable sales. In a stable market we look at a 6-months sales history. In a rapidly declining or appreciating market we typically look only at the most recent 3-4 months. We also have to make price adjustments to the comparable sales prices to account for differences that make the comparable sales either superior or inferior to the subject property as finding a house that is exactly equal is difficult. Differences in square footage, lot size, age, location are just some of the things that make adjustments necessary. Once we have made all the adjustments, we come up with fair market value. I hope this helps.
Web Reference: http://www.go2kw.com
1 vote Thank Flag Link Sun Oct 7, 2007
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
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Market value is actually determined by what the market will pay. We as realtors can use comparable sales to give an opinion of market value, and appraisers can give you their opinion as well...but it all comes down to what the market will actually pay in the end.
0 votes Thank Flag Link Sun Oct 7, 2007
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