We hear a lot about the market, especially in my line of work, but today I wanted to explain to you how the market actually works.
To tell the truth, the real estate market is a free market like any other market.Take the stock market, for example. Let’s say you bought stock with Apple for $100 and now, today, that stock has gone up to $500. That $500 is what the market is willing to pay, assuming you want to sell your stock.
The inverse is also true. If you buy something for $500 but the market ends up only valuing it at $100, the latter is how much you can expect to earn if you sell.
Something is only worth the value it has in relation to the market. In the real estate market, a lot of people are afraid to sell because they tend to forget that the market functions in a way where value isn’t entirely linear.
Inflation happens. In the real estate market, money is relative to other currency. If you had a dollar from 100 years ago that stayed at its original worth, it would be worth a lot less than a dollar today.
So when considering the value of your current home, its original value or price isn’t nearly as significant as what the market says it’s worth today. The market does not care what you paid for your property.
Buyers are looking to get the most for your money. So if you and your neighbor have the exact same house listed for the exact same price, but theirs has granite counter tops and other upgrades, your house simply isn’t worth as much.
“The market only cares about what is happening today.”
In order to make a buyer interested in your house instead of your neighbors, in this scenario, your house would need to be priced lower.
Markets are always working in terms of relativity. Comparisons are everything, just like in any other market. The market only cares about what is happening today.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.