Price versus value in the Property Market

People often discuss about how they bought their houses and say that they bought it at a good price or their house is valued at a certain price. However, is there a distinct different between “price” and the “value”.

Although price and value can be used interchangeably when buying or selling a property , they have their own unique characteristics that you should keep in mind to make informed decisions about your property investment.

While it is understandable to be drawn to low-priced listings, that investment might not prove to be worth the cost in the long term. A property that looks like a bargain may come with the usual problems associated with cheap real estate, such as a poor neighbourhood, low rental income, high crime rate, or a deplorable infrastructure where the suburb is widely underdeveloped.

While price is an important factor when searching for a property, you also need to look at other factors such as whether it is worth investing in the first place. Also, some properties are priced higher than their fair market value. This can lead to them costing you thousands more than you would like. While they may be attractive, properties that are too expensive will usually require more maintenance, repair, and upkeep.
Remember that the value of a property is not always equal to its cost. This should be something you consider when buying.

Key differences between value and price

The price is the purchase price of the property. This number is displayed in the listings. It is what the owner wants to receive when selling their home. This rate may change depending on market conditions or any negotiations you have with them.

Fees that you will need to pay after you have made an investment in the property. Some expenses you can expect include Stamp duty , Conveyancing, Legal costs, search fees, building and pest reports and real estate agent costs.

If you are borrowing money to buy your investment property, you will also have to pay a mortgage which will include a portion of your principal and interest or interest only. Please note that your rental income doesn’t cover costs of your mortgage in most cases. Also factor in situations where your house has no renters for certain months which means you are paying all the mortgage cost associated.

The fair market value is the price the property would be sold for on an open market basis. The fair market value, unlike price, is harder to define as it is an accurate appraisal of a property’s value, which can be difficult to determine.

To calculate the fair market value, it is important to ensure that all parties are:

• Be aware of all facts about the property
• They act in their own interests
• Do not feel pressured to sell or buy.
• You have enough time to make your decision

To determine whether the property is fair priced, consider its fair market value and compare it with the asking price when looking for investment opportunities.

Distinguish value from price

Although it may seem difficult to determine the value of a property relative to its cost, with the right resources you can make educated decisions about whether or not you want to invest.

Figuring out how much your property price would increase by is often a good way to determine if it is worth the investment. In the property market, it is called Appreciation which refers to the gradual increase in value over time. The value of a home may increase or decrease depending on its location and the market conditions at any given time.

Appreciation is based on when there is positive development planned, such as a new shopping centre or large company moving into the neighbourhood, good infrastructure built around the suburb including parks, bicycle paths, schools, kids playground, good transport facilities and more. Take a note of details such as when it was built, lot size, architecture, and condition. Find out about the area in terms of historic, current, and rental values.

Do your research on the nearest suburbs which are fully developed and do a price study on those suburbs appreciation value and this can also be used as a minor indicator.

Appreciation can increase the property’s value. This can be compared with the price paid by the seller to determine if it is a good investment. The future value of the property will help you decide whether to buy it or look at other options. If you invest in the right suburb and at the right time, your property investment’s capital growth would be significant and you would yield high passive fixed income on investment.

A trust worthy real estate agent can help you compare and organize all of the necessary documents to determine the property’s value.

Experts can provide accurate market analysis and forecast appreciation. You can trust them to give you the right information. Because they are experts in the market, they can compare the fair market value with the selling price to advise you whether it is worth negotiating a lower price.

An experienced and competent real estate agent will be able to offer sound advice regarding property investments.