Myth: The sale price is the value of a property.

 

Truth: Rarely will two individuals estimate the same value for a property, particularly when one is a seller and one a potential buyer. A sale price is the result of negotiations between a buyer and seller, each with their own particular motives and knowledge.

Sellers and buyers are often motivated to buy or sell based on factors unrelated to the value of a property. Motivations include tax position, personal circumstances, time and intended use of a property. A seller may be using the proceeds of the sale to finance another transaction. In such as case, there may be potential tax savings at stake, or a deadline rapidly approaching related to the second property. A buyer may have sold their current property and is now in a hurry to move into a new facility. In each of these and many other cases, the price asked and price offered for a property can be affected by the motives of the buyers and sellers. Lastly, there is always the chance that the market is limited and inadequate data was available to the buyer or seller for a proper analysis, resulting in a purchase price not truly reflective of market value.