The current market value of a property is determined according the following standard:
The price at which a willing but not anxious vendor would sell, and at which a willing but not anxious purchaser would buy.
Theoretically, if someone bought the property at current market value as an investment, then decided to sell it again, they should be able to find someone else who is prepared to pay the same price in the same market, and so on.
This formula was developed by the High Court of Australia in the case of Spencer v The Commonwealth. This was a case about the compulsory acquisition of land, and the owner of the land felt that the compensation offered by the government was inadequate. The High Court had to decide as to how the value of a piece of land should be determined on the day ownership changed.
Justice Isaacs said…
“To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to person best capable of forming an opinion, of a rise or fall for whatever reason in the amount which one would otherwise be will to fix as the value of the property.”
The vendor’s aim, when selling real estate, is to establish the current market value of the property and then to seek offers over the current market value. The vendor is seeking a purchaser who is anxious to buy. In other words, the vendor wants to sell to someone who wants the property as a home and is prepared to pay a higher price in order to secure the property he or she really wants.
The best way to determine the current market value of a property is to consult an accredited valuer.