New(er) light on property value

Banishing the black arts

Good old bricks and mortar are one (two?) of the most tangible and tantalising bastions of conventional thinking and subjective opinion in financial transactions. They’re also a fecund arena for urban myths, epistles of professional envy and biz-world horror stories that serve to support every shade of prejudice under the sun.

Property markets in general are renowned for their almost total lack of real transparency beneath a skin of numbers, with valuations and prices often rooted in financial arm wrestling and supply chain “partner imperatives”, as well as featuring unpredictable fluctuations and buying/selling arenas in which the so-called professionals are often publicly considered the commercial epitome of corporate insincerity and willful truth-bending.

Surely there can be a better way than this hocus-pocus non-digital market structure? Especially considering the importance of commercial property in any business constellation – as seen from both sides of the fence.

True market value

In mid-2016, a Danish company under the name TrueMarketValue made its entry into this market, circulating its marketing around the tantalisingly attractive idea of “Don’t leave money on the table”. Unfortunately, the company seems to be somewhat stuck in insider-speak, struggling a wee bit with explaining its services clearly and attractively. Nevertheless, reading between the lines seems to give a glimpse of an attractive way to deal with the purchase/sale of commercial property in a digital marketplace.

Not to be confused (I assume) with Edmunds.com’s True Market Value (TMV®) pricing for the US vehicle market, True Market Value is a term commonly used in conjunction with online real estate auctions, aiming to create transparency for the buyers and ensure that the seller maximises the price of the property – hopefully reaching a figure more in alignment with some mythical entity considered true market value. This transparency is considered to provide a fairer/better and more reliable deal for all parties, as well as being auditable should any disputes regarding the deal arise.

According to the Danish company, with True Market Value the entire sales process – and the final negotiations, in particular – is fully documented and participants can witness the process. The process takes the form of an online auction conducted within a closed, pre-qualified forum, thus saving oodles of time and manpower. All buyers are bidding on the same terms and conditions, whereas sellers benefit from avoiding time-wasters.

Risk management

Commercial property markets are in constant flux. They can be crazily volatile as well as being pegged to multiple opaque, subjective criteria, with imperfect, unequal access to transaction-critical information.  We all know that market is constantly changing, and engaging in such transactions on uncertain, unpredictable terms can be an unpleasantly wobbly business that doesn’t gel well with normal ideas of risk management and well-informed decision-making.

The crux of the matter – supposedly at least – is the idea of free and equal access to information to ensure a transparent basis for decision-making about sales/purchases of commercial property.

A reliable digital trail of concrete facts related to the transaction and accessible to all parties concerned also makes it easier to indulge in comparative scenarios and performance measurements – always a good thing for business operations that indulge in this kind of financial/commercial expedition on a frequent or professional basis.

Debunking the myth of market value

Auctions are probably the most efficient (well, least inefficient) way yet found to determine the market value of a property. It’s a familiar, well-proven concept, and companies such as TrueMarketValue allege that this kind of mechanism – if well managed – will often drive the price up.

As described by TrueMarketValue, this transparency provides clear advantages for all parties. TrueMarketValue apparently ensures that both buyer and seller can see, monitor and trust the transaction process, and also be sufficiently convinced that the agreed sticker price at the end is fair and equitable – which are presumably some of the basic requirements for a true market value (assuming that the concept isn’t really a tripartite oxymoron).

Don’t leave money on the table – how delightfully down to earth as a portrayal of the transparency scenario. And somehow it makes much more sense.

PS like money other fintech startups, it seems this company didn’t survive. In August 2019, the site was dead. But it can still be seen here via Google’s cache.