How do YOU define "Market Value"?

Question

Hello All!

How do YOU define "Market Value"?  I know some investors (including myself) define it as the price the property will sell for on the open market in it's current condition (regardless of what that condition is) ...

And I know investors who define it as the price it will sell for on the open market after repairs or a full renovation.

I'm just curious...how do YOU define it?

Russell Brazil · Answer

Market value is when any 2 individuals agree on a price.

Brian Lacey · Answer

http://www.investopedia.com/terms/m/marketvalue.as...

"Market value is the price an asset would fetch in the marketplace."

That's the actual definition.

Ned Carey · Answer

The vast majority would say market value is what it is worth in its current condition.  Market value for a specific house is NOT what it is worth in renovated condition. The would be after repair value (ARV).

Personally when I buy I am thinking what it is worth to me as in investor. The "Market" often overpays or underpays for what Warren Buffet would call intrinsic value.

Chris Mason · Answer

Kind of, @Nate Wightman. My point was more that if the most you could get is $200k, and you're a reasonably intelligent and prudent fellow, then it's a $200k home.

We can call it a $300k home if we want, but we're lying to ourselves. What are we even basing that $300k on, but a fanciful whim?

We just established that the most you could get for it is $200k. So it's a $200k home. Period. It doesn't matter if it took $400k to build it, it doesn't matter what Zillow says, it doesn't matter that we might have some fond memories in the home, it's not relevant that our dog had puppies over in that corner, etc. None of that matters.

The most you could get for it is $200k. So it's a $200k home. That's it. No need to over think.

A buyer might estimate what she thinks the ARV will be, but we're not going to know until actual buyers actually step up and make actual offers to actually purchase.

Nate Wightman · Answer

so when i sell for $200k and buyer agrees to buy a $300k home for $200k then market value of a $300k home is $200k

goes to what Chris Mason was saying... i think :)

Ryan K. · Answer

As an appraiser, there are a few different, but very similar definitions for market value, I'm sure you've all seen them before.  However, the best definition I've heard is:

Market value is the price where both the buyer and seller think they're getting screwed.

Mark Vejnar · Answer

@Bevla Reeves

The cost approach to value is probably most applicable when looking at candidates for rehab. Simultaneous examination of sales comparables and income producing properties is also essential for determining how much "meat is on the bone," what exit strategies to consider, and whether or not it's a viable opportunity for investment.

Ian Walsh · Answer

The definition is correct.  I would add that the confusion can come in when looking at 'condition' of property.  People tend to get lost when comparing the condition of the subject property and what the market has been able to fetch in truly similar condition.  A bit off topic, but a general area of confusion that I see.

Mark Vejnar · Answer

Market value depends on the market. The three approaches to value used in residential appraisal are focused on arms length transactions between two parties of sound minds. The contract price demonstrates clearly what someone will pay, and as long as it is within a certain percentage of competing sales it will likely be the value used. Same for income and cost.

Refi values are a different animal. I've never understood why lenders will offer such high LTV percentages on refi. It seems to negate the margin of safety. I understand TVM and all that, but it seems like a dice game to me. However, I'm not a lender and don't care to learn that model so I'll remain blissfully ignorant.

Thomas S. · Answer

Market value is a educated guess of what a property may sell for based on comparable comps for the area.

ARV should really be ARMV.    After Repair Market Value

Actual value is what a property sells for..

How do YOU define "Market Value"?

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