Many people ask, exactly what is Market Value? The term has a long definition which can be found at https://www.gafarrell.com/useful-information . Briefly however, it means what a willing buyer would pay a willing seller under normal terms and conditions.
When you are buying or selling a home or maybe going to refinance your mortgage, a valuer is frequently called in to determine the Market Value of the property in question. After inspecting the home and gathering all the relevant data on it, the valuer will then look for sales of properties within the same neighbourhood to ascertain the Market Value of the subject property. To use a simple case, if your property is located within a development of similar homes and some have sold recently at say $1M, then the value of the home is $1M unless some change (positive or negative) has been done to the home.
However, most times, the neighbourhood comprises homes of different sizes, finishes and extras. In these cases, the valuer has to determine the contributory value of the differences and make adjustments accordingly. For example, assume a home sold for $2M and had 2,000 sq.ft. of land more that the home being valued. Then, if the valuer determines that the value of the extra land is $200,000 and that was the only difference, a value of $1.8M would be placed on the home being valued – $2M selling price of the other home less the value of the extra land it had.
It should be pointed out that in arriving at the value of an extra feature, the valuer has to determine what the market (i.e. typical buyers) are paying for that feature and NOT necessarily the cost of the feature. Take the case of a home that sold for $3M and the valuer is valuing a similar home except that the one being valued also has a swimming pool. It is necessary for the valuer to ascertain (by examining other sales in the neighbourhood) the contributory value of a pool in that neighbourhood. Should the valuer determine the contributory value is $150,000, then this figure must be added to the $3M that the other property sold for in order to arrive at the value of the property being valued. The valuer can NOT simply add the cost of a pool (which may be more or less that the $150,000 figure) to the selling price of the other property.
It is therefore very important that a valuer obtain as much information as possible about sales in the neighbourhood of the property that he is valuing. Unfortunately, in Trinidad and Tobago, sales information is considerably more difficult to obtain than in many other countries. Whether you are a buyer, seller or real estate agent, you want a valuation that is as accurate as possible. Consequently, it is in everyone’s best interest to supply the valuer with as much information as possible regarding the actual property as well as details of sales of other properties in the neighbourhood. In addition, when you obtain an opinion of value in a valuation report with which you do not agree, assuming there are no significant factual errors or ommissions about the property, then the best chance of getting the valuer to change the opinion of value is to supply information that support your opinion and which the valuer may have been unaware of. Remember, a valuation report is an opinion of value based on information that the valuer possesses.