In this week’s VREP short, Matt and Adam discuss the true meaning behind Market Value, a commonly used but often misunderstood term in the Real Estate industry.
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Adam: Okay, Matt, so VREP Short # 3
Matt: Right. Episode 51.
Adam: Market value is not always what you think it is.
Matt: Yeah. We’re talking about market value… what is market value?
Adam: Well loosely defined it’s what a seller is willing to accept and what a buyer is willing to pay.
Matt: Yeah but that’s……
Adam: But there’s always more.
Matt: Right. I mean often people come to us and talk about the market like what is my place worth almost as if there is a fixed amount, right? That we can pinpoint market value but it’s a little bit more complicated than that and what got us thinking about this is there was recently a sale in Vancouver, listed for about six months, languishing on the market.
Matt: I mean they could not sell this place. They relisted with another agent, increased the price and I was watching with a client from the sidelines. They held off on offers and got 3, 4 offers and blew it out for 150K more than asking.
Adam: Right. Wow.
Matt: And we were sitting there, you know. This led to a conversation with my client. Okay, so there is 200-250K difference in market value over the course of a couple of weeks, like it just didn’t make sense.
Adam: It doesn’t make sense. So the question is… what changed.
Matt: Yeah, so what changed in this case was the new agent, the team that took that listing on, made a really compelling case for the property and we went through and we viewed it and they had a series of arguments for why it was worth what they had it listed at. And the other thing was the property had some issues
Matt: Right and it was making a lot of buyers nervous. They took those objections or the uncertainties head on, right?
Matt: And they said this is exactly what is coming up. This is exactly what it’s going to cost. We’re laying it out and everybody knows exactly what the story is.
Adam: So, we’ve said it here before but I’ll say it again…take away uncertainty from a property, right? Because uncertainty is what kills deals. It’s what prevents people from putting pen to paper.
Matt: Right, but that’s part of a larger point that we wanted to make here about making an argument, right?
Adam: So when you are listing your property and when we do a market analysis on your property part of what we are doing is actually structuring an argument.
Adam: So remember college papers?
Matt: I remember them all too well.
Adam: Yeah, yeah. Well you spent, well we both spent a little bit too long in university.
Matt: We spent a combined total of about 15-17 years in university so we’ve written a lot of papers.
Adam: Yeah. A lot of papers so it’s actually not too different from writing a paper. So if you say you had a thesis statement and you were writing supporting premises for that thesis statement it’s the same idea. So the thesis statement here would be ……
Matt: The thesis here is the price that you are offering the property for.
Adam: Right. And you have to support that somehow so….
Matt: So in this case, right, say in an intro university course you have a thesis or the argument of your paper. A B C are the key points when you’re listing a property. If the thesis is the price you are offering it for, what are some of the arguments you would put forward for that price.
Adam: Well, for example the unit in the same building sold at this price and it’s got maybe the same exposure.
Adam: Or a house down the street with a similar size lot just sold for x amount, right?
Matt: Right or there’s nothing else on the market right now and we’re getting a ton of interest at this price.
Adam: Sure. Sure. So those are all arguments but also you want to be able to make sure that you are handling any kind of objections or counterpoints.
Matt: Well and this is going back to the intro university course if anyone remembers that. This is part of writing an effective paper right? Is you have to look at the counter arguments and take those head on and that’s exactly what that listing did, right? They said, “Okay here’s what people are going to look at with this property and say this is a problem.” Here’s another problem and they said, “Here’s the problems and this is why it is still worth this value.” They took it head on. That’s what you have to do with a university paper and that’s what you have to do when you line up a listing.
Adam: So, yeah, essentially any concern you’ve handled.
Matt: Right. You want the argument to be air tight. You don’t want anybody saying, “Hey what about the pipes?” And you have that look on your face like aaaaaaaaaa, you know.
Matt: You want to know it all.
Adam: So the object of the exercise is to figure out market value based on a sound argument and make sure that you can control the narrative around the property.
Matt: Right. So the key take away here is that market value is very much impacted by the arguments you make and the presentation of those arguments and that is why it is so important to have the right team supporting you when you go to sell a property.
Adam: Absolutely. Join us next week.
Matt: Take care guys.
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This is the Vancouver real Estate Podcast. Short.