By Ian Lazarus,
If you haven’t noticed since February properties at the Jersey Shore have been on a tear. For anyone that has followed the ups and downs of their homes know that the market is a snapshot that of that day.
So why is the market value and the market price different? What is the difference of those two terms? Why does it matter?
What does market price mean in real estate? Market price is what a willing, ready and bank-qualified buyer will pay for a property and what the seller will accept for it. The transaction that takes place determines the market price, which will then influence the market value of future sales. Price is determined by local supply and demand, the property’s condition and what other similar properties have sold for without adding in the value component.
Marko Rubel wrote; “Market value needs to be differentiated from market price which is the price a property can actually be sold in a certain time frame. Market value is a suggested frame of reference. It is the subjective determination that certain real estate property is worth a determined price if offered for sale in the open marketplace, the price a seller may reasonably expect in an open market by fair negotiation, excluding those distressed sales fixed by the necessities and circumstances of a highly motivated and distressed seller. Such market values are normally determined by a realtor, real estate agent, broker, or licensed appraiser, any of whom can make comparisons to similar real estate, property sales in the immediate local area, such comparisons commonly referred to as comparables.
Keep in mind, market value is an opinion of what a property ought to sell in a localized competitive market predicated upon the features and benefits of the subject property, supply and demand, and how the property stacks up compared to others similarly situated. The major difference between market value and market price is in the eyes of the beholder, the seller or the buyer, and if they come to an accord, they two agree on the true market price. Price may be the preeminent driving factor but it is one factor among several. Unlike market value, an appraised value is not necessarily the price a property will be bought or sold for. Many times, to be sure, a property may be worth more than a given appraised value.” Thank you Marko Rubel for the clarification.
Think back to April or May when there was no inventory and buyers lined up on the first day a property went on the market. We saw the offers coming in with no mortgage contingencies, home inspection clauses waived and larger down payments than normal. That day there weren’t any comparable sales to use, they were all under contract and only a few knew those figures. In that period of time 15 year old houses were selling for the same prices as 25 year old houses if they were both 4 bedrooms and three baths. The quality of construction and the current condition wasn’t a priority to the buyers who wanted to get the house.
They were probably at the last property waiting on line and not bidding more than they thought they wanted to spend. Now they have a chance to grab this one that is 10 years older, but on the market for the same price as the last. Now buyer Smith is going to win this one for his wife. He bids full price plus $50,000. Remember when you heard these stories? Bingo!! They win the bidding between 10 other families and and go to settlement. That became the market price, but was that the market value?
How about the situation when a seller goes under contract with a buyer who then puts his smaller condo on the market and sells it for basically the same price. Those few months had a lot of uncertainties. At the bottom are the Market Reports for the Cape May County island communities for you to review. Check out our websites below to see properties. Call you you have any questions.
So where do you think the prices are going to go? Did we hit a top for the near future? Are we going to go sideways until we sell off the next batch or sellers? Are we going to drift lower for a while until more buyers jump back in because they think the prices are better or they can afford their dream home at the shore?
Personally, I would like to see what happens in the spring to answer that question. The Spring is always the season for higher prices because of being close to Memorial Day and rental income potential or just enjoying the place with family and friends.
What do you think? Tell me what you think? Thank you, Ian