What it is: Market Price vs. Market Cap

What is market price and how does it differ from market value? 

These two terms are used a lot in the real estate industry, but not everyone understands what they mean. For those looking to be a real estate investor, with high returns, you need to understand the difference between price and market value. Essentially, the market price is what someone is willing to pay for a property.   T Market value, on the other hand, indicates how much a property is actually worth. Here we cover the concepts and the factors that affect them.  

Market value is the cost of replacing an asset. It can be used to determine the sale price of a property if it were new.   It is typically used in real estate investment transactions to determine a price that can be used for financing purposes and the amount that sellers are willing to pay accept.

The market price of a property is equal to what buyers are willing to pay. The market value of a property is usually equal to the value of the property on the open market.  However, market values and prices often reflect other factors, such as such as the costs associated with selling a home, and therefore differ from the nominal price that someone may bid or offer at any given time.

Three factors can be used to determine the value of an investment property: the real estate market, the features, and the benefits.

How the Real Estate Market Affects Market Value

Property prices are highly affected by supply and demand in a particular area. For example, in a buyers' market, the demand for homes is low, but there are many homes on the market. This lowers prices and results in a win-win deal for the buyer.   At this stage of the market, The investment is usually focused on renting, especially if the value of housing loans (index rate + spread) becomes a high cost and increasingly less affordable for those who want to buy.

On the other hand, if there is a low supply of homes in the sellers' market and high demand, it will allow sellers to increase the price of their homes and make more profit from the sale. In the area of investment and in this market phase, the operation of buying to sell quickly and which is called flipping, It is usually the most widely used form of investment. As a real estate investor, you must understand the markets in a specific area,  to determine when to sell and buy.

How Property Characteristics Affect Market Value

What are the characteristics of the property? These can be terraces, gardens, raised floors, accessibility, which increase the market value of a house. Understanding what are the criteria, which favor the market value of a house is important for investors, especially if they plan to do some design on the house.  Understand that certain features can also decrease the value, That's why it's important to do your research.

For example, the top floor of your building may have a higher market value because it is a gated community with ocean views. On the other hand, apartments on the ground floor will have a lower market value because they are less secure and have less privacy.

It is for this reason that we have been noticing an effort by developers and builders to mitigate the absence of certain qualities, benefiting others, in new developments.

Market Price

The market price of a home includes the costs of selling a home, such as broker commissions and closing costs. It is usually presented as a percentage increase or decrease from the previous price. However, it should be noted that this term is often confused with market value.  Market value is the price at which a property would sell on the open market, Considering a realistic amount for expenses such as broker fees. The market price is the amount an individual is willing to pay for a property.  It takes into account other conditions such as financing capacity and compensation allowances, But it doesn't include real estate agent commissions and closing costs (which vary from state to state).

To help you determine the market value and price

Assessing Market Value - Certified Appraiser

You should use a professional in transaction processes, valuations for partitions, inheritance valuations, valuations for accounting purposes, judicial valuations, among others, for a correct and detailed valuation of your assets, so that you can make the best investment decisions and in the management of your assets.

Comparable Sales

Another way to understand the market value of a property is to look at other comparable sold properties in the same area. They should be of the same type with the same area approximately. Make sure that the sales have taken place within the last three months and are in the same general area as the property you want to value. You can use some online tools that can help you determine a value.  

Evaluate Market Prices

An experienced real estate consultant can offer estimated values of homes sold based on recent and comparable transactions in your area of expertise.

Things to consider

Because the market price is equal to what buyers are willing to pay, the actual price of a particular property can vary constantly. For example, the market price of your home may be quite different from the amount you paid if:

• was purchased several years ago when interest rates were higher or,
• if you live in an area with high real estate values. 

Essentially, the market price is the value at which your investment property is being sold, and the market value is what it is worth. 

Make sure you are being well supported in the decision-making and do your research to ensure a fair price and make a profit. Not always the best solution is the one that is visible, buying and selling the properties on the unlisted market, It can mean a better return and less pressure from all the elements involved and gives privacy to the entire process.

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