oc | Thursday 23rd January

How to Find Out Market Value

While the you place on a is ultimately the most important factor in influencing what you are prepared to pay, you also want to know its market . But how do you know what that is? Is there some secret market formula?

No there is no single definitive “sticker price” market value figure when it comes to residential homes. Unlike BHP shares where it is possible to know the market value at any given moment just by looking at the list of bid and ask prices that indicate what other sellers and buyers are prepared to accept or pay for a share exactly the same as yours.

With homes there are two major differences from shares – systems for viewing other opinions of market value are often not as transparent and rarely are two offers exactly the same on either the buying or selling side.LookingforMarketValue

In Melbourne the closest we come to the sharemarket market value system is an auction with multiple bidders and it is a great system when not affected by price- distorting practices.

In order then to have something like an accurate opinion of a property’s market value before an auction or private sale, we could build our own “Collective of Opinions” along the lines of a sharemarket’s Bid and Offer, Open and Close, High and Low Boards.

Agents have to do something like this when they come up with an estimate of what a property is likely to sell for. It’s only ever going to be an estimate, points out Tim Fletcher of Fletchers , because the only way to truly value a home is to ‘put it on the market and find out”. But there are some some important indicators of what the market might be willing to pay for a particular home, he says. First, look at what the home sold for last. Two look at trends in the overall market – is it a buoyant booming market, or is it looking a bit sluggish? Then it’s a matter of comparing recent sales in the street, suburb  and area/municipality.

One of the biggest pitfalls for vendors, says John Haley of Barry Plant Eltham, is to base market value on one “hot” sale of a property in their own street. He believes the most important indicator of a property’s likely value are comparable sales that have occurred in the last few weeks as well as comparable properties currently on the market. “Like shopping for most things, buyers are comparing prices, so there must be some relativity there, otherwise buyers are unlikely to inspect your home!”

Jenny Dwyer , says that she looks at a number of factors in valuing a property: its location and its closeness to beach, shops, schools and transport, the size itself, the streetscape and the surrounding properties, the age and condition of the home and comparable sales achieved within the suburb over recent months.  But, she adds, “there is always the ‘x’ factor where some homes have an intangible extra about them where logic often plays no part and market forces will clearly determine the outcome.”

Meanwhile David Hart of Buxton says that the agency arrives at an estimate assessing the value of the land, and add the value of improvements, combined with an analysis of recent comparable sales evidence. However, he adds, agents also go by gut feel for what buyers will pay for a property, based on many years experience, “which interestingly enough, often ends up the most accurate.”

A home’s market value is often more a concept than a figure – but we live in a modern world and that requires a figure. So while there are many differences in market valuing homes there are some across the board consistencies – criteria and method. 3 main criteria are valued – land plus building plus the X factor or emotion and the main method in determining value of each is comparing what others have paid for similar criteria.

Printed each week in The – Melbourne’s Million Dollar Plus Magazine

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