Do your Buyers and Sellers understand the true definition of Market Value?

By
Real Estate Agent with Edina Realty

Definition of Market Value

Here's the definition of market value used by the International Association of Assessing Officers (IAAO).

Market value is the major focus of most real property appraisal assignments. Both economic and legal definitions of market value have been developed and refined. A current economic definition agreed upon by agencies that regulate federal financial institutions in the United States of America is: 

The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: 

The buyer and seller are typically motivated; 

Both parties are well informed or well advised, and acting in what they consider their best interests; 

A reasonable time is allowed for exposure in the open market; 

Payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; 

The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

 

Above is the IAAO's definition of market value.  Do you educate your Buyers and Sellers of your area's true market value?  In my opinion, the media has played a significant role in Sellers pricing their homes too high, and Buyers choosing to make low-ball offers (and missing the window of opportunity).  Professional Real Estate Agents must educate Buyers and Sellers on the true market value in their  local area.  Buyers and Sellers are counting on us to be the expert in pricing, whether they are buying or selling.

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Rainmaker
73,329
Frank Bailey Sr.
Keller Williams Realty - Schertz, TX

Buyers and Sellers are counting on us to be the expert in pricing, whether they are buying or selling.  - This is so true and you are right on point.  Now a days sellers are scared they are going to have to give their house away because of the news and buyers want to insult every seller on the market.  At the end of the day price your house right in this and any market and you will find a buyer, its just you have to wait a little longer.  Trust your agent to guide you, great post.

December 17, 2008 10:47 PM #1
Rainer
28,617
Darla Jensen
Edina Realty - Crosslake, MN

Frank - Thanks for your support.  We need to educate our sellers (and buyers) with regard to the difference between "assessed market value", "appraised value" and true "market value".

December 18, 2008 11:01 PM #2
Rainmaker
1,108,139
Jim Frimmer
HomeSmart Realty West - San Diego, CA
Realtor & CDPE, Mission Valley specialist

That definition, which I agree with, is why I dislike Realtors who are trying to sell foreclosures and short sales by saying that it's priced $100,000 below market value. No. It's priced $100,000 below what the sellers bought it at three years ago. That, however, is not today's market value.

December 20, 2008 06:55 PM #3
Anonymous
Anonymous
Anonymous

I will ditto Jim's comment directly above mine.

Best wishes for health, happiness, peace, and prosperity in 2009.

December 23, 2008 12:15 PM #4
Rainer
28,617
Darla Jensen
Edina Realty - Crosslake, MN

Hi Russel - I agree with your and Jim's opinion.  Thank you for your support.

December 23, 2008 09:14 PM #5
Rainmaker
563,876
Mike Saunders
Lanier Partners - Athens, GA

Darla - it looks like too many agents don't understand the definition either, with the number of overpriced listings out there. The problem right now is nailing the market value d'jour.

December 26, 2008 08:08 AM #6
Rainer
28,617
Darla Jensen
Edina Realty - Crosslake, MN

Mike - Well said!  Thanks for the visit.

December 27, 2008 07:42 PM #7
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Rainer
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Darla Jensen

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