What Does Market Value Mean in The Real Estate Industry?

If you’re a real estate investor or someone who works in the real estate industry, understanding the concept of market value is important. Real estate market value essentially means the value of a piece of real property as it relates to market conditions for a local area. Real estate market value can vary from location to location based on several factors, including inventory, local economic factors and prices of homes recently sold in the area.

Should You Negotiate Market Value?

One of the benefits of market value pricing for buyers is that it leaves room for negotiation. Since market value is somewhat arbitrary and dependent on local factors, buyers can potentially make the case that the actual value of a piece of property is less than what is being asked. They can then negotiate the price down to a figure that is closer in line with similar pricing elsewhere.

On the other hand, sellers can just as easily point out that market value is a fair valuation based on real variables affecting the local real estate market. For instance, if an area is undergoing a major transformation from a rural town into a metro area, the case can be made that homes will be worth more because of the development taking place around them. In these circumstances, it doesn’t matter what similar homes sell for in other areas.

How Can You Find the Current Market Value?

There are several ways to arrive at a market value figure if you’re selling your home. As mentioned above, you can use surrounding homes of comparable size and layout to see what those homes have sold for in the area. This doesn’t mean you should make a one-to-one comparison, but it does mean that you can get an idea about the current market value.

Also, it’s a good idea to pay attention to the economy as a whole as well as your local economy to determine market value for real estate. If the country’s economy is doing poorly, this may indicate people will not be buying homes, and therefore, your price may need to come down. If your local economy is booming, however, you may be able to raise your asking price since your home may be seen as more desirable.

Read a similar article about how to estimate your homes value here at this page.