When you start looking for your new home in Surrey, British Columbia, your real estate agent is going to be doing the same thing your old Markham real estate agent was doing - bandying about a lot of real estate insider terms. Some do this because they forget many buyers don't understand, and others do it because they think it makes them seem more knowledgeable. Not to worry, you can always turn to us for clarification. The buzz phrase we'll be dealing with today is "below market value."
Market value is the term for what houses are worth according to what someone is willing to pay for them. Buyers set the market value for everything from Toronto condominiums to Surrey houses simply by deciding how much they offer for the property. By combining all of these purchases into one average (such as a price per square foot) this market value can be used to estimate what another house is worth. Therefore, when something is below market value, it is priced at less than a buyer would be willing to pay.
Why, you may ask, would anyone price a home below market value if they know that buyers are willing to pay more than that? The answer is that sometimes homes are given a lower price as an incentive because the seller wants to get rid of their King West condos quickly. It can take time to find the buyer who is willing to pay the most, show the house, negotiate, sign the papers, etc. If the seller is moving on a tight schedule, this is one option to get things done quicker.
However, real estate agents sometimes say that the home is priced "below market value" for a "quick sale" to entice buyers into thinking that they're getting a deal, when really the supposedly lowered price is the best they can reasonably hope for. You'll see this in Brampton real estate and elsewhere when the prices are going down and people don't want to acknowledge it. You'll see this in Surrey right now.
So how do you tell if a home is really priced below market value or not? Your North York real estate agents should be able to tell you, since they work for you and not the seller. Another way to tell is if a large number of homes claim to be priced below the value, as this indicates that the market is dropping rather than a lot of homeowners just happen to be trying to move quickly at the same time.
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