Real Estate Market Value

Let me first start by saying I have very little knowledge and experience when it comes to investing, real estate, or any kind of financial management. However, I check the MLS listings (this is just the site I use, there are many others...), craigslist, and other for sale listings almost everyday. And I constantly see the same thing, which I think might be a bit untrue.

Here is a perfect example. If you think about what they are saying, you might feel as though I do. The seller is claiming that by purchasing this house, you will gain instant equity. I think that they are intending to say that the house will immediately gain more value, or its worth more than what you bought it for.

This is where i dont agree. Imagine you but his house for $300K. Now instantly, for no reason, the house is worth $315K? Isnt the value of an item in a free market defined by how much someone will pay for that item? Isnt the true value of this house $300K, because that is how much you bought it for? I believe it is. I admit this value could have something to do with other market factors like interest rate or supply of similiar houses, but its still the market value. There might be small benefits if you are able to appraise the house for more (like what this owner claims) if you plan on getting a line of credit against your house. But other than that, I don't see why it matters. Not to mention it seems in the best interest of appraisers to appraise a little on the high side. That promotes buying and lending, and guess who benefits from that...

Basically, in my opinion, this is just a ploy to try and get someone to buy the house. Its kind of like when a house is listed at a price, and not purchased. Then the price goes down, because the seller wants to sell it. It can be a selling point by a seller to say that the price was just lowered or its $X less than originally listed. That doesnt mean anything because clearly nobody was buying it at that price.

And I still havent commented on the thing that really bothers me in real estate transactions, and that is realtors. I have no idea how they still manage to get $18K for seller the above house. It is rediculous. I think in certain situations (like moving into an area you are unfamiliar with, or selling your house from out of state...) they can be valuable. But if you are willing to do the research, all the information that they provide you is available free. And trust me buying a house without one is not difficult. I knew nothing going in and was able to buy a house directly from an owner. (I do feel bad that I had to 'breakup' with my realtor, I just didnt see how it was worth the money.) Perhaps that is a way to get instant equity... if the exact same house gets sold for $X with an agent, and you sell yours for the same price without an agent, you just made 6% right off the bat...