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Who sets the market value?

Discussion in 'The Buying & Selling Process' started by Lizzie, 19th Apr, 2016.

  1. Lizzie

    Lizzie Well-Known Member

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    We're interested in buying a property.

    I was to go to auction around 3 weeks ago, but auction was delayed due to lack of interest ... then auction was cancelled due to lack of interest (or people who could actually get finance).

    Real estate agent knew we were the only serious contenders so asked us to put in an offer. Based on recent sales of similar properties we made what we feel was a fair bid ... but we're not prepared to go higher.

    Vendor rejected offer so I spoke to agent detailing my comparisons - all properties had positives and negatives that, I believed, countered each other out.

    The agent then told me that they thought the other properties had been sold too cheap ... then, when I said market value is what someone is prepared to pay, they said the value is what the vendor is prepared to sell for ...

    ... now ... this agent is one of the top ones in the area - and one I have dealt with before - but I was flabbergast by the reasoning. My belief is buyers set the value true - not the vendors.

    Hoping they go away and talk some sense into the vendor - or perhaps they over-quoted from the start, to get the business, and now are trying to save face.

    Regardless - we are still the only interested party with the $$ available
     
  2. Chilliblue

    Chilliblue Well-Known Member

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    I always thought it was where a buyer and seller reached an agreement in exchange for goods for services.

    That in mind, the previous sales would apply unless they were all forced sales and how would the agent know that?
     
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  3. Lizzie

    Lizzie Well-Known Member

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    True - agreement between the buyer and the seller ...

    But - when you have a product - that previous sales dictate is worth X - why would you price yours at X+Y - and then when there is only one interested party at X - why would you insist the value is still X+Y?

    Anyhow - there is no reason we have to buy this particular property ... I'm just a little bemused
     
  4. melbournian

    melbournian Well-Known Member

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    similar i got one where there is a IP that is currently being sold with potential permits of 3 townhouses. One of the townhouse is only 2 bedroom 88 sqm. i told the agent the plans are worthwhiless as they would be sold for less and there is no margin in it. but the vendor wants an extraodinary price for them.
     
  5. Perthguy

    Perthguy Well-Known Member

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    The last time I had to do that, I put it in writing... a 3 page written submission to the REA who then passed it on the to seller. It worked! :)

    You are right, the agent is wrong. Market price is set by the buyer. A house on the market for $850,000 for 12 months is not worth $850,000. This happened recently in Perth and the property was taken off the market after 14 months. The market determined it was overpriced.
    Seems likely.

    The seller doesn't have to accept a lower offer. They can keep the house if they want to :p
     
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  6. See Change

    See Change Timing Lord Premium Member

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    I'd go and look at other properties the same agent has ..

    cliff
     
  7. Big Will

    Big Will Well-Known Member

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    Market price is what a buyer is prepared to pay and seller is willing to sell at.

    You are prepared at x
    they are prepared to sell at y

    You are not reaching market price it is somewhere between x and y (or even y itself).

    Either raise your offer or go look elsewhere, if it doesn't sell the vendor will reduce their expected price and will fall more inline with the market (or the market catches up to their expectation).

    Not that this is the greatest reason but sometimes it is a number thing there is a big difference in people's mind to sell at 499,999 compared to 500,000 as it feels the vendor has won. Sometimes going just a little bit more gets over their mind hurdle.

    What if the properties were sold cheaply? What if they were sold expensively? Just play with the information you have and play the game you want or move on.
     
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  8. Barny

    Barny Well-Known Member

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    Sellers set the price. You want you want something they have, you have to pay for it.
     
  9. neK

    neK Well-Known Member

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    Market value is where the vendor and buyer meet.

    The meaning of "top agent" is open to interpretation.
    - Top agent could mean heaps of sales (easy to do if you list the price low)
    - Top agent could mean setting price records.

    Now if this agent could convince you to pay more even though your research indicates its not worth that much, then indeed he/she is a top agent.

    Simple Theory:
    These are the agents you sell with. You don't bother buying from these agents.
    The agents you buy with are the agents you NEVER sell with :)
     
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  10. Skilled_Migrant

    Skilled_Migrant Well-Known Member

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    Market value=> Buyer's Greed = Seller's Fear
     
  11. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    I'd say it's a bit of both.

    As another example, a store may be selling a product for $1,000, but other stores may sell the same item for only $600.
    If the store selling for $1,000 has a good reputation and good repeat customers, it's likely the first store will sell some of their product for the $1,000 asking price.
    In this case, it would seem the vendor is setting the market price.
    If the other stores selling for just $600 knew about this, they may raise their prices knowing that customers are actually willing to pay that much.
    Different example to real estate, but I believe it's still relevant.
    It's not always about supply and demand.
     
  12. MTR

    MTR Well-Known Member Premium Member

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    One word comes to mind 'dumb'.

    The market dictates the price always has.

    As sellers we can place any price we want on the property but does not mean it will sell.

    Those who ignore this will shoot themselves in the foot..... because the property will stay on the market too long and buyers gets spooked and the sale price continues to fall, and the longer on the market the harder it is to sell.
     
    Last edited: 19th Apr, 2016
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  13. MTR

    MTR Well-Known Member Premium Member

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    I think in the main consumers are way too savy and shop around and expect good service and competitive pricing. At least this is how I operate and my guess most will do the same, otherwise I would be feeling ripped off
     
  14. Perthguy

    Perthguy Well-Known Member

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    It's funny that when I sold something in gumtree, I set my price a little higher than the competition and made a quick sale. A higher price creates the perception that my product is better than the equivalent.

    Doesn't work with real estate though. I don't know how people can say the vendor sets the value. If there is no buyer at that price, there is not sale and no value. The vendor sets the price, the buyer sets the value.
     
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  15. Barny

    Barny Well-Known Member

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    If there's no buyer at that price then the seller reduces the price, they still set the new price too.
    But sellers won't take what people offer unless it's the price they want, or need.
     
  16. MTR

    MTR Well-Known Member Premium Member

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    unless it's a distressed seller, ie loss of job, financial stress, divorce etc .. seller may have no choice
     
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  17. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Probably depends a bit on the property too.
    If it's just some common generic property, I'd guess the market would have more influence on price.
    However, for more unique and rare properties, the vendor can have claims as to why it is worth more and good salespeople could get better prices provided they find the right buyer.
     
  18. MTR

    MTR Well-Known Member Premium Member

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    yes agree ie development sites, period homes
    though in bust cycles these properties are also effected
     
  19. Perthguy

    Perthguy Well-Known Member

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    True. The seller always sets the price. The buyer sets the market value. Market value is what a buyer is prepared to pay.

    There is no market value until there is a buyer at that price.

    That's not true. The first offer I accepted (as a seller) was more than asking.

    My most recent offer I accepted was a little less than I wanted and I didn't need to sell. Sometimes sellers are pragmatic and take what they can get at the time regardless of what they want or need.
     
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  20. Propertunity

    Propertunity Exclusive Real Estate Buyers Agent Business Member

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    The current market value of a property is determined according the following standard:

    The price at which a willing but not anxious vendor would sell, and at which a willing but not anxious purchaser would buy.
     
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