As a component in an algebraic formula, Market Value is a constant- It is the highest price the market will bear for a property, regardless of condition, location, the seller's duress, mortgage amount due, average asking price for ‘Active' listings, or offers on the table. The dollar amount that is Market Value varies according to market conditions, property condition, location, etc, but Market Value is Market Value- It's simply the amount consumers are willing to pay for this product. If the home is listed at an aggregated Market Value and not selling, there is an additional condition to the property that lowers its value below the aggregated price and must be factored- Both by the seller and listing agent, and especially by the buyers agent, to protect the buyer. This could be a condition such as poor location (a home that is located next to a land fill is not worth the same as an identical home located on the top of a hill with a panoramic view of the countryside), poor or substandard condition (and condition is a factor in determining Market Value, so if that's the case, the price it's at is not that particular home's Market Value), or a need for a costly upgrade or repair (again, part of the determining factor in it's original Market Value, and the sort of thing we should be considering before writing an offer). The approach has been to look at Market Value as a number, and it simply doesn't apply. Market Value is a concept that can be quantified on an individual basis into a number, and what that number is will vary from person to person, property to property, and year to year.
Home owners are looking at how much they need to make from the sale to pay off the mortgages, how much they'll be able to put forward on the new house, the vacation the profit will pay for, the Corvette they always wanted, whatever... but not from a business transaction standpoint. We did not watch little Suzie take her first steps in the living room, help Tommy bury Squiggles the Hamster in the flowerbed, or survive the financial hardships of starting and supporting our now grown families in the house. And while none of these things contribute to the dollar value of the property, all of them factor into the decision making process of someone who is emotionally attached to the sale. These things have to be considered when placing an offer on the house, and while we all want to buy for as cheap as we can get, offers that don't satisfy some level of need for the seller will not even get a response. It is much easier to negotiate when both sides come to the table.
Buyers need to take this into account when placing an offer- What is the Market Value of he home. The goal is, of course, to get the home as inexpensively as possible. However the main goal is to get the home. An offer to purchase a $300,000 home at $200,000 is not likely to receive a counter offer, and certainly not likely to get accepted. So we try again, rewriting the offer for $250,000. Still too low, the seller ignores the offer. And while the Market Value for the home may be only $280,000, we've now upset the seller with our low-ball, time wasting offers. We'll be lucky to get an offer accepted at the full asking price, and you can forget about getting an accepted offer below asking price. This is not to say you should be willing to pay more than Market Value for the home, or that you should not try to get the home for less than Market Value, but we need to be realistic in the offers we make.
Sellers need to understand that Market Value is not effected by what they want to get, The hamster burial grounds in the back yard, or anything else but Market Value. List your home within reason of Market Value- $50,000 high will not bring you very many offers unless your home is in the multi-million dollar category. As market conditions fluctuate, the quantified Market Value will change, up or down depending on conditions. Your real estate professional is there to assist you with determining Market Value, and you should heed the advice they give. In a growing market, you might be able to get away with pricing higher than Market Value (some), because the demand is there, and it might appraise by the time it's under contract. The reverse is true in a declining market- You'd better price a little below market, because it may not meet appraisal in a month and a half. Ultimately your goal is to sell the home as soon as possible for as much as you can get. An agent who would take your listing at a price higher than Market Value is not doing you any favors, and may actually hamper your sale. Longer market times are the reward for over pricing your property, and longer market times make you look desperate to sell. Now the offers you do receive are likely to be well below Market Value. You may even need to drop your asking price below market just to get an offer. This is also not to say you shouldn't try to get the most you can from your sale, just that we need to be realistic about how much is the most you can get.
In the end, market conditions set what the value of the home is, regardless of what side of the sale you are on. Look to your real estate professional to know what the Market Value is, and plan your strategies accordingly. Set your price just above and place your offers just below, and create a win-win situation for you and the other guy. You'll find the process much easier and far less disappointing.
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