Determining Market Value
Posted by Joel Gwillim on Friday, April 5th, 2013 at 4:45pm.
‘Market Value’ is definitely a description synonymous with Real Estate. Vendors are always curious and eager to determine what the ‘Market Value’ of their product is. My best depiction of ‘Market Value’ would be the amount a purchaser is willing to pay or exchange for merchandise based upon the current supply and demand trends. So it would be safe to say the customers/purchasers have a fairly firm grasp on defining ‘Market Value’? Pretty tough to disagree. I like to say, a product is only worth what someone will pay for it. This statement definitely applies to Real Estate. In Calgary’s Real Estate market, or pretty much any market for that matter, property prices are affected and determined by supply and demand. A lot of listings on the market, the buyers are in control, can be more picky and ultimately pay less due to additional competition and motivation from other sellers. A small inventory of listings translates into frustrated buyers, multiple offers, over-list sales and typically surging price points. Whether you’re on the buying or selling end, do a little research going in to find out how to get the best bang for your buck based on timing. Savvy Real Estate individuals have been doing this for years, factoring in when is the best time to jump into the market and/or perhaps say sayonara and unload a property. A Calgary Real Estate professional [*cough*such as yours truly] can help you out with past sales data, current inventory, expected prices, value based on area/size, and the list goes on and on.
Now let’s take a fun example and compare it to Real Estate. And what better way to break it down than by using Calgary’s former poster boy and absolute gentleman, Jarome Iginla. Anyone who follows hockey and the Calgary Flames in general, knows that moving Iginla was a sad yet real discussion years prior to his actual departure to Pittsburgh. Let’s evaluate this deal if it happened three years earlier. Jarome’s ‘Market Value’ would have been much higher as for one, he would have been 32 years old and two, he was just coming off an almost 90 point season. So we could kind of collectively say he was a bungalow, in a great area, with recent upgrades and all mechanical aspects in solid, working order. Sounds like a pretty sensible investment that could generate a decent return. Fast forward three years and Iginla is traded to the Penguins hockey club for two prospects and a first round draft pick come June. A lot of the Calgary fan-base faithful were disappointed in the return for their hailed captain. But many are forgetting he is now a 35 year old competitor, coming off a 67 point season, playing in one of the fastest games on earth. The current average age of a NHL player is 27. After a while, you just get left behind, the body is a magical and wondrous device, but eventually it wears out. It's like a vendor trying to sell an older home compared to the rest on the block, you likely have to settle for less. Iginla’s ‘Market Value’ had dropped off recently compared to when the trade rumors initially commenced. So it resulted in a lower offer than the owners and fanbase originally hoped. Anything with perceived value is always going to be compared to similar merchandise/product. In this case we’re comparing humans. Well, humans with a great knack for the game of hockey. It's no different in Real Estate, a property is merely worth what a consumer will pay for it at a certain time.
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