Market Value vs Market Price

Market Value and Market Price mean different things to Sellers and Buyers

To a seller they value their property based on the amount they have put into as well as its amenities. From the buyer perspective they value a property based on other properties on the market in comparison to price and its amenities. The amount a seller has into the property may not influence the price of the property equally.The problem is that sellers and buyers may not rate value equally.

Many real estate agents suggest that it all comes down to price. Is it true that a property sells just because of price? What about the value aspect?

When I market a sellers property, I determine the market price first based on comparables in the neighborhood backed up by market data. Then I determine a market value after assessing the actual property in terms of its condition and amenities based on what I know that the market actually values and then price the property so that it sells in 30, 60 or 90 days. In the Santa Fe market, we are rarely seeing properties that sell with multiple offers and above asking price, so my rationalization on value vs pricing is based on where I am located.

Market Value

Market value is based on opinion of what a property might sell for in the current market based on the features and qualities of the property, the overall real estate local market, supply & demand and what other similar properties have sold for. Taking into account the location of the property in its surrounding neighborhood.

Market Price

Market price is based on comps, appraisals and what a buyer actually pays for the property and what a seller will accept. Price is based on supply & demand. In the market of foreclosures the price is often substantially lower than market rate, so that the lender who owns the distressed property can quickly unload it in a shortest amount of time. The value component is not a consideration.

The difference between market value & market price is that market value for the seller might be more than the buyer is willing to spend. Value can create demand, which in turn can influence price.  Without demand, value will not influence price. As supply increases and demand decreases the price goes down. When the supply decreases and demand increases the price will rise and then value will influence price. In a balanced market, value and price is equal.

Sellers and buyers can view value differently. A seller may feel that their location next to a golf course has benefit, while a buyer may see that as a negative. Value is very subjective. An appraiser often overlooks the the cost of replacement. For instance one can buy granite counter tops for $30 per sq ft or they can buy granite at several hundred dollars per square foot. The appraiser does not care of the actual cost the seller paid for the materials. This cost factor is often what trips up the seller in pricing their property. Cost of replacement alone is not the only contributing factor in correctly placing value.

Is price the bottom line?

In a buyers market or even a neutral market, price will determine a sale. In an economic unstable economy buyers are more cautious and they often take longer to decide. When a property is in need of repairs, the seller can reduce a price substantially or they can make the repairs without reducing the price. The cost of repairs is almost always less than the reduced price. A negative feature will be overlooked if the price is right. Many properties with negative features or major problems, still sell at a very reduced price.

But what happens when a property does not sell even at a greatly reduced price?

Perhaps it is the wrong property type for the area. For example, I had a listing for a live work property where the mortgage was “under water” and could not sell anywhere near its replacement cost. Reducing the price to substantially below its costs and at where comps that sold as foreclosed properties, still did not yield a buyer. If this property was located in San Francisco, Seattle, Los Angeles, Austin, Chicago, Denver or New York, I could just specialize in this property type, but in Santa Fe, it is not a desired property type. Santa Fe buyers are coming to Santa Fe to retire or have a second home in the neighborhood where I specialize in. Most buyers want a 3 – 4 bedroom home, single level with upscale amenities. A live work loft buyer would be less than 1% of the market profile. This property type has very little value in the market place, unfortunately for the sellers.

Marketing, increased exposure and staging can often add more value and increase demand, which int turn will increase the market price. But unusual property types aside, marketing a property can stimulate interest and create the buzz, by telling the properties story, its “why”.

Marketing a property is not just listing a property.

Good marketing with the right story will drive more traffic to the property. When buyers arrive at the property, they can touch and get the feel that you are trying to convey and then the property has to sell itself. Price combined with effective marketing is what exposes the property to the buyers. Implementing a good marketing strategy is what will help sell the property for the highest price.

It’s all about marketing. Good marketing can create value.

Marketing your services, marketing your products, and marketing yourself, no matter what you do as a human being, it is all about marketing. Everyone, mostly unconsciously, markets themselves everywhere they go, with everything they say and do.

Therefore, a good marketing strategy should enhance the value:

• Good marketing inspires.
• Good marketing seduces.
• Good marketing promotes values.

So what is your homes “Why“? Why this house? Why is this house different than the others?  How does this home set it apart in the marketplace, adds value and makes a difference?

Dianne has been a dream maker, an online marketer, and social media evangelist,  helping clients cultivate their dreams. She is currently focusing on helping buyers & sellers of real estate manifest their dreams.

Contact Dianne to help you create the path to your success by identifying your online marketing goals & implementing a strategy in this age of social media marketing. Call: 505.603.9300 or email: webdesign@cometstudios.net