The term 'Market Value' is included in the Accounting edition of the Financial Dictionary. Get your copy on Amazon in Kindle, Paperback or Audio edition. Choose your edition here...
With regards to real estate, market value is the price which a real property seller can anticipate obtaining from the property purchaser in normal open and fair market negotiations. In general, appraisers value a home or other piece of real estate property utilizing a number of critical factors. When markets are volatile, such prices will vary significantly. Real estate agents may place one value on a home or other piece of real estate, yet in the end, the true property value is only what an able and willing buyer will actually pay to acquire it.
It is crucial to be aware of the market value of a piece of property individuals or businesses are selling as this ultimately sets the asking price of the real estate in question. Those sellers who are not intimately aware of this will either overprice their houses or under price them. Either of these actions will often lead to poor financial results. Not being aware of a property’s true value can cause homeowners to become victims to practices of predatory lending. In this unscrupulous lending behavior, the bank or other lending financial institution will prevail upon a borrower to take out a greater amount of money than their property is really worth.
It is real estate agents or better still professional appraisers who determine most accurately the market value of a house or piece of real estate through measuring it up to other properties in the area or neighborhood which share similarities with the one in question. Real estate agents and appraisers call such recently sold area properties “comparables.” They will always seek to find houses which are as alike in style, size, and location to the one they are appraising as possible.
Such properties must have sold within the prior six months to a year. According to this strategy, the professionals will similarly discern what the typical price per square foot of the houses in the area actually is. This practice by itself will not set the market price of a house, but it will give the professionals a good starting point from which to set a reasonable and viable asking price for the property.
There are also various other factors which influence a property’s market value. These include the condition of the property in question as well as any improvements which the seller makes. Where a home is concerned, bathroom and kitchen renovations and updates are the main ones which will boost the selling price. Other more cosmetic appearance improvements like new carpet, fresh paint, updated light fixtures, and special window treatments will help a house to show better and perhaps sell faster, yet they will not increase the all around value of the home.
Yet it is absolutely true that the overall condition of any piece of real estate will impact its total value. Houses that boast more current and better maintained appliances and systems, roofs, windows, and even entry doors will realize a significantly better final selling price than those which offer flawed structures or outdated appliances, systems, entry doors, and mechanics.
In corporations and investments, market value is the price for which a given asset will sell in the open market. This measure of value can often be applied to the market capitalization of any company which is publically traded. Determining the market cap value is a matter of multiplying out the current price per share by the quantity of total outstanding shares.
This measure of market value is simplest to calculate for those instruments which are traded on exchanges, like futures and stocks. This is because their market prices are readily available and commonly disseminated. With over the counter securities such as fixed income securities, it can be far harder to ascertain. Yet the most difficult to determine market values are those commonly associated with less liquid assets such as businesses and real estate. This is why business valuation experts and real estate appraisers determine the market values for such assets as these.