The explanation of "market value" in this article applies to single family houses only. Different methods apply to apartments and other commercial real estate.

The meaning of "market value" confuses many people. As consumers, most people shop at retail stores and pay the price printed on the price tag. A sweater is worth $24.95 because the price tag says so. A hammer is worth $10.95 because the price tag says so. We really don't question it, because we are programmed to pay the amount of money listed on the price tag.

When stores have sales on certain items, it is because the store did not sell all of these items for the listed price within a certain period of time. The sweater was not worth $24.95 to enough people. Therefore, the store must now lower the price to persuade people to buy the remaining sweaters.

At the beginning of the Fall clothing season, the market value of the sweater was $24.95. In March, when we have more interest in Spring clothes, the market value may drop to $9.95.

Market value is simply the price at which something will sell within a reasonable period of time. In a normal or average real estate market, "reasonable" means one to three months. Here is our definition:

Market value is the price at which a particular house, in its current condition, will sell within 30 to 90 days.

This definition contains three elements:

1. Particular House
2. Current Condition
3. 30 to 90 days

The only real measure of market value is what a particular house sells for. However, unless you have a crystal ball, you might think you cannot predict how much someone will pay for the house in the future.

Not true. You can learn to come very close to predicting the true market value of any house even without a crystal ball. Realtors® do it every day. Even so, the appraisal of real estate is more art than science. An appraisal is only an opinion, an educated guess. Let's start learning to predict market value by analyzing each of the three elements of our definition.  
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The Particular House

When you determine market value, you must always remember that you are estimating the market value of one particular house. The location, or neighborhood, of this particular house is the starting point for your investigation. The exact same house in the next city, or even on the other side of the same city, is not relevant to this determination.

For example, a house located in Edmonton , Alberta could be worth $200,000. But if the exact same house were located in St. Albert (a suburb just west of downtown) it might be worth only $265,000. That's still a hefty price.

Although this may seem like an extreme example, house prices throughout the country fluctuate significantly from city to city and from neighborhood to neighborhood. Therefore, whenever you determine the market value of one particular house, you must compare it only with similar houses in the same or nearby neighborhoods.
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Current Condition

Next, you must assess the current condition of the particular house. The current condition determines the number of buyers who are interested in purchasing the property, which affects the amount of time the house remains for sale on the market before it is sold.

Most home buyers want to buy the prettiest house on the block. Is the house gorgeous and ready to move into? Or is it a dump that needs a major renovation?

Simply subtracting the amount of estimated fix-up costs from the selling price of other similar houses in the same neighborhood is not an accurate way to determine current market value for a particular house. If a house in good condition could sell for $80,000 and the house you are interested in needs $4,000 worth of repairs, that does not mean the current market value of your house is $76,000.

Here's why: Far fewer buyers want to buy a house that doesn't look pretty. When a house attracts fewer buyers, it takes longer for the house to sell. To attract more buyers and sell the house sooner, the price must be reduced by much more than the mere cost of repairs.

Although the current condition of the house is an essential element of market value, it is almost impossible to determine exactly how much the physical condition of the house affects its value. This simply is not an exact science. As a general rule, you should be fairly safe if you subtract two to three times the amount of the fix-up costs.
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30 to 90 days

In a normal real estate market, if a house doesn't sell within one to three months (30 to 90 days), the reason is simple: The price is too high. Even perfect houses don't sell within this time frame if the price is too high. On the other hand, if a house sells within one to two weeks, the asking price was probably too low. A house that sells within one to three months is priced at the true market value of the house.

Imagine this scenario. It will take a year to sell a particular house for $100,000, six months to sell it for $90,000 and one week to sell it for $70,000. The price that will sell this house within one to three months lies somewhere between $90,000 and $70,000. The price that will sell this house in one to three months is probably right around $80,000, its true market value.

Market Value is simply the price at which something will sell within a reasonable period of time.
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Improving Selling Time

Selling your home? How soon will it sell? Ten days? Seventy days? Three hundred thirty days? What factors can influence the time it takes to produce a serious buyer?  

When listing your home, ask your real estate agent for the average sale time in your neighborhood. This can be determined by averaging the actual number of days required to sell other homes in the same area over a set period of time, say the last six months.  

Let's say that average is one hundred twenty days. What can be done to speed up the time it takes to attract a buyer? Plenty. Three factors will affect the actual marketing time on your home: 1) price, 2) terms, and 3) condition.  

If the condition of your home compares favorably to others currently for sale in the neighborhood, and you are offering comparable terms, your price may be adjusted to reflect greater value to prospective purchasers. Because buyers' comparison shop before making a decision, they will perceive greater benefits in your home at less money. This alone can cause buyers to compete favorably for your home.  

Terms are another factor which may be adjusted to attract buyers. If your home is priced fairly at "market value", consider offering seller financing at a lower than market interest rate on a portion of the sale price. Flexible terms may attract an entirely new group of potential buyers.  

Condition alone can sometimes prompt fast buying decisions from impressionable purchasers. Consider upgrading your home by making major repairs and cosmetic improvements before selling. A home that sparkles with pride of ownership can trigger emotions resulting in an instant sale.  

The key to a shorter selling time on your home is to offer one or more unique benefits to buyers. Be creative and you may enjoy an even faster sale.
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Make Your Home Appealing

So you've decided to sell your home. Let's take a look at all the things you can do to increase your chances of success.

First of all, it helps to understand the mindset of the typical home buyer.

Most buyers have certain priorities in mind when they shop for a house. By the time they finally make an offer to purchase, they have probably visited several places which meet their basic needs.

What makes them choose one home above the others?

Experienced real estate agents tell us that, once the basic requirements have been met, choosing a home becomes an emotional decision for many buyers. They may weigh the pros and cons carefully, but in the end they'll often choose the one that "feels" right.

So how do you make your house feel like the perfect home? The trick is to communicate subconsciously by appealing to the five senses.
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Try these special tips practiced by savvy real estate agents to tip the scales in your favour:

• greet your visitors with the scent of fresh flowers or the aroma of freshly-baked bread or cookies
• have pleasant music playing softly in the background
• give the impression of spaciousness and airiness - remove bulky furniture, open the curtains, turn on extra lights
• display colour photos of outdoor views during different seasons near the front and back doors
• build a homey atmosphere - have family photographs tastefully arranged here and there, but don't overdo it!
• add warmth whenever possible - light a fire, turn on lamps rather than overhead lights, close curtains at night
• see to your guests' comfort - prepare a spot for coats and footwear, and arrange seating to help them with their shoes/boots depending on the season

These strategies are especially effective for open houses - an occasion when it's in your best interests to pull out all the stops. For private visits, be creative and do whatever you can on short notice to make your home appealing.
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