Let me start by telling you what it is not. Market value is not necessarily what you paid for the property or the accumulative financial investment you have in the property from remodeling, additions, upgrades or added features during the period of your ownership. Your property market value is not what your neighbor sold their property for nor is it replacement cost that you and your homeowner’s insurance carrier decide on. Market value is not what it would cost to find a comparable lot and recreate your property. Market value is not the debt or liens on the property nor is it the value the tax assessor assigns for taxing purposes. Your market value is not necessarily what any real estate appraiser states as opinion. If you order six appraisals, you will likely get six different value opinions influenced in part by who paid them. Your market value is not necessarily what any real estate broker estimates. It is not what you list/offer the home for on MLS. Market value is not what a prospect or buyer broker tells you after touring your property. As price range goes up, these facts become even more obvious. What your property is “worth” is just another factor and influence upon Market Value.
Market Value is simple. It is the selling price adjusted by any concessions that the seller and buyer alone agree upon, put in a purchase contract, signed and closed. When someone asks me how the upper end residential market is doing in the foothills/Evergreen area, I tell them I will let them know after the next showing. That is how small and impactful one high-end sale is to our overall market attitude and values. Appraisers delay their reports often just waiting for one meaningful closing to occur.
Mountain properties are highly discretionary purchases. There are no large employers in the foothills. Very few residents must live here – it is by choice. When buyers don’t absolutely need a property, they tend to be more conservative and definitely don’t want to pay over market value. More mountain property buyers now consider their purchase as an investment as much as a home for their families. Many mountain property sales are not primary residences or buyers don’t consider their purchase as their forever home. They usually factor in a potential resale and don’t want to lose money with the investment. This is why I believe we don’t see rapid or radical spikes to market value here in the foothills.
In a seller’s market (generally defined as more buyer demand than available property inventory) sellers can sometimes command a sale price higher than list price and current market value. In a buyer’s market (generally defined as more properties available than buyer demand) buyers can usually demand a sale price lower than list/offer price and sometimes even lower than current market value. In Colorado, a seller can take one of four actions when receiving an offer on their property: 1) accept 2) reject 3) accept subject to a counter proposal 4) nothing at all. So, your actual property market value stems from a pure and simple happening – when seller with all seller’s influences and factors and buyer with all buyer’s influences and factors, alone come to a meeting point on price and terms to transfer ownership of the property and then close the transaction. Your closed transaction and market value then become an influence upon the next buyer and seller trying to come to price and terms on a property sale. Ultimately and collectively, only buyers and sellers that close property transactions establish and modify evolving market values.
Market Value is not necessarily one specific number but falls within a relatively tight price range. When your Colorado Mountain property is in a good location with a good floor plan, well maintained, clutter free and clean, it will typically sell on the high end of this market value range and sell quicker than the competition. If your property has poor location, outdated floorplan and finishes, deferred maintenance, and is dirty and cluttered, it may not sell at all, regardless of market value. Therefore when you ask me what your property is “worth”, I will probably have a different answer for you than when asked the question “what is the current market value of my home”.