Why Market Value is Important for Buyers & Sellers in Real Estate

Why Market Value is Important for Buyers & Sellers in Real Estate

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Close to 5 million homes are assessed for market value every few years in Ontario. The property assessment process involves looking at the location of a home, the size of the property and the features inside of the house. Any new additions or renovations to the house will increase the potential market value.

Some assessors will also take older or undesirable features of the property into account lowering the market value based on the cost for replacement or repair. The final figure that is calculated is known as the market value of the property. This market value signifies what a willing objective buyer would pay for the home if it were for sale in the current marketplace. Knowing the market value is important for several reasons.

1- Fair valuation

There was a time in the history of Ontario when assessments were not based on market value. Assessors before the 20th century often valued homes individually with no regard for markets or surrounding properties. This resulted in many situations where identical homes were assigned wildly different values.

Using a market value assessment system ensured that all homes were valued fairly, based on facts. This helps homeowners since improvements and renovations will increase property values in a predictable way. Buyers benefit because a simple property assessment can determine whether the asking price for a piece of land and/or property is reasonable.

2- Realistic financial data

The market value of a home provides realistic financial data to property owners, financial institutions and municipal governments. This helps to determine the borrowing power of a homeowner against the equity in the property. It also reduces the amount of risk that banks must take on when determining whether to provide financing.

The market value of a property is often used when determining mortgage refinancing rates and municipal budgets. The market value is very useful for individuals who are selling a property. It provides an advantage in the Ontario marketplace when dealing with buyers who are attempting to negotiate much lower prices.

3- Factors that affect market value

Some property assessments do not consider all real-world factors. This presents a problem for buyers who are inexperienced in real estate. Liens because of taxes or other issues follow property and not individual owners in most cases.

If an individual purchases a piece of real estate that currently has liens or other problems, then the purchaser will need to pay these debts. If the purchaser pays full market value for a home in this state, then the final purchase price of the property will be far above market value.

Another factor that could affect market value is if economic conditions or conditions in the immediate area suddenly change. This could make assessments inaccurate in a very short amount of time.

4- Avoiding problems with market value

One way to avoid problems when making real estate purchases is to perform a title search in Ontario before every transaction. A title search goes through all existing records to ensure that there are no liens, legal actions or other encumbrances against the property. It also verifies the legal owner of the land.

Buyers who take the time to run a title search in Ontario will not be surprised during auctions that reveal few details about the building for sale. Modern title searches can be performed in a very short amount of time if the records are digitized.

If you plan on buying or selling a home, visit ComFree.com today.

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