Difference between PRICE AND VALUE for a Home

Difference between PRICE AND VALUE for a Home

BY Diane Lott, Broker

Paradise Found Realty

There are 2 fundamental differences between price and value.  Price represents the dollars that a particular buyer agrees to pay and a particular seller agrees to accept. Price refers to the amount of money actually paid in a transaction. Value, marked at a certain place in time, represents the monetary worth of a property. Value is conceptual in nature and is influenced by economic forces such as supply and demand.

Let’s talk value:

Many types of value exist, and each lead to a different valuation of the property. However, there are four typical characteristics of value that apply to all type of value.

DEMAND:  In economics, demand is more than a desire or need.  Demand also implies the available means to obtain what is desired.  The need or desire combined with the economic (financial ability to purchase) creates “effective” demand.

SCARCITY: The availability of property in relation to present or anticipated demand determines scarcity.  If the supply exceeds demand, there is less scarcity, and the value falls.  If demand exceeds supply, more scarcity is created, and the value increases. For example, when the number of available apartment units in an area exceeds the demand, apartment units are relatively less scarce, and the landlords must reduce rents or lose tenants. When apartments are scarce, landlords can increase rents, and excess demand will fill any resulting vacancies. This also corresponds to available houses for sale in an area.

TRANSFERABILITY: The legal ability to convey title and possession of goods creates it.  Value cannot exist in cases where rights in land and the use of property cannot be transferred.

MARKET VALUE OF A HOME:  Is the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.  Implicit in this definition is the consummation of a sale as of a specified date and the passing of the title from seller to buyer under conditions whereby:

*Buyer and seller are typically motivated;

*Both parties are well informed and well advised, and acting in what they consider their best interests;

*A reasonable time is allowed for exposure in the open market;

*Payment is made, and price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

Be Well

Diane

Email:  Diane@ParadiseFoundRealtyFl.com

Website: www.ParadiseFoundRealtyFl.com

Phone:  954-294-5060

Your  Martin County Concierge Real Estate Company!