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Why You Must Not Mistake Real Estate Market Value for Best Value

By Expert Author: James Kobzeff | Article Abstract
Word Count: 356 words | Views: 127 view(s)
In this article we want to explore the notion why an income property's "market value" may not indicate the best value for the property.

Market value doesn't always equal a property's "appraised value" or "sales price." Market value refers to the selling price of a property only when that sale conforms to the criteria of a market value transaction. However, when you estimate the market value of a property based on the sales prices of other properties, you must always investigate the terms and conditions under which the comparative properties sold. A duplex that sold recently for $350,000, for instance, doesn't necessarily indicate that a similar nearby property will sell for $350,000. The sale price depends on the terms of the sale and the detailed features of each property.

Remember, too, that the accuracy of your market value estimate directly relates to how well you describe the property's features. Carefully identify the positive and negative differences that make a difference. To make smart investment decisions, real estate investors must know features, properties, neighborhoods, construction costs, and lot values, and then base their investment decision on knowledge, sharp reasoning, and wise judgment about their discovery.

Also, realize that market value and past appreciation rates do not forecast the future. Even if you buy income-producing property at a bargain, you're not going to make money if the property is about to fall in value. Whereas, you can make great returns even if you pay full market value if the property (or location) is about to take off.

Here's the bottom line. Whereas, you never want to buy income property without an accurate understanding of its market value, understand that market value itself does not tell all you need to know to make profitable investing decisions. Besides figuring out what a property is worth today, be sure to answer these questions, too: Will the property generate adequate cash flows? Can you expect the property to appreciate? Can you add value to the property?

Remember, successful real estate investing depends on knowledge; so the more knowledge you obtain and correctly analyze, the better and more profitable deals you will make.
James Kobzeff

About the Author/Author Bio

James Kobzeff is the developer of ProAPOD - leading real estate investing software since 2000. Create a cash flow analysis for rental properties in minutes! Go to=> www.proapod.com

Article Source: http://www.articlesphere.com/Article/Why-You-Must-Not-Mistake-Real-Estate-Market-Value-for-Best-Value/175300

Article Submitted: 2009-01-27 | This Article has been viewed 127 times.

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