Who decides the price of a real estate sale?

An in-depth analysis of the dynamics of property prices: market value and the Real Estate Market Observatory (OMI).

Establishing the price of a property to sell is a complex operation that requires a thoughtful evaluation of multiple factors, not only of an economic but also legal and logistical nature. It is usually said that who decides the price of a real estate sale it is the “market”. But who is the market? An economist will tell you that it is the point where the supply and demand curves intersect. A lawyer, however, will give another definition: it is the meeting between the wishes of the parties. Finally, a real estate agent will tell you that it is the average of the prices charged in the same area, considering the conditions of the property (any renovations), its exposure, the height, the prestige of the condominium and a series of further factors. Among all, perhaps, this last one – although less technical – is the most precise answer:

who decides the price of a real estate sale in fact it is the “marketability of the property”. Let’s delve deeper into this aspect.

The different interests at stake

The decision on the selling price of a property involves various subjects, each with their own interests and objectives to pursue:

• salesperson: the owner of the property aims to maximize the proceeds from the sale, obtaining a price that reflects the real value of the property and allows him to make a reasonable profit compared to the purchase price of the same property;
• buyer: the buyer’s intent is to acquire the property at an advantageous price, in relation to his economic resources and the characteristics of the property;
• real estate agent: the professional who mediates the sale has the task of facilitating the meeting between the needs of the seller and the buyer, proposing a fair and realistic market price but, at the same time, as high as possible, given that his percentage is calculated precisely on the latter value.

To have a more impartial evaluation, the parties can rely on a

real estate appraiser: professional figure with specific skills in the real estate sector, with the task of drawing up an estimate of the value of the property, providing an objective and impartial judgement.

Price evaluation methodologies

There are different methodologies for determining the sales price of a property, each with its strengths and weaknesses:

• comparative approach: it is based on the comparison between the sales or rental price of similar properties, located in the same area and with similar characteristics;
• income approach: evaluates the property based on its ability to generate income, considering factors such as rents received or rental potential;
• cost approach: estimates the value of the property considering the costs necessary for its reconstruction or renovation;
• investment approach: those who sell a house are unlikely to do so at a lower price than the one they bought it for at the time, compared to changes in inflation and the cost of living. Normally, all improvements made to the property or building as a whole (renovations) are also added.

Factors that influence the selling price

In addition to the valuation methodologies mentioned above, the selling price of a property is influenced by a series of factors, including:

• characteristics of the property: dimensions, location, state of conservation, energy class, presence of appliances, height of the floor, presence of an independent heating system;
• conditions of the real estate market: price trends in the area, supply and demand for similar properties;
• location of the property: the area where the apartment is located, how it is located, the presence of essential services (shops, supermarkets, pharmacies, shopping centres), street lighting, etc.;
• psychological factors: expectations of sellers and buyers, negotiating ability of the parties.

The role of compromise in price determination

In most cases, the sale price of a property is defined through a process of negotiation between seller and buyer, which leads to the signing of a deed commonly called “compromise”. The compromise, also known as a preliminary contract, is an agreement with which the parties undertake to stipulate a subsequent definitive contract, concerning the sale of a property. In other words, the compromise represents a commitment to conclude a future definitive contract, defining the essential terms of that contract. The parties can no longer withdraw from the compromise.

The compromise must contain some essential elements, such as:

• the object of the future definitive contract (real estate or other asset);
• the agreed price;
• the personal details of the contracting parties;
• the deadline within which the definitive contract must be stipulated;
• the payment methods.

How to evaluate the selling price of a property via OMI

The Real Estate Market Observatory (OMI) is a service established by the Revenue Agency with the task of collecting, processing and disseminating data and information relating to the values ​​and prices of properties, both residential and commercial, throughout the national territory.

The OMI aims to make the real estate market more transparent, providing citizens and operators in the sector with useful data and information for a more informed assessment of property values.

The data collected by the OMI are used by the Revenue Agency to combat tax evasion in the real estate sector, identifying any inconsistencies between the values ​​declared in the sales documents and the real market values.

OMI data is also used to support public policies on construction and urban planning.

Every citizen can compare OMI values ​​online to verify the market value of a propertya value that is determined on the basis of the average of the sales, purchase or rental prices in the same area of ​​properties in the same area and with the same characteristics.

The OMI collects a range of property-related data, including:

• type of property: residential, commercial, industrial, etc.;
• location: municipality, area, address;
• characteristics of the property: surface, rooms, floor, energy class, etc.;
• sales or rental price: price agreed in the deed of sale or lease;
• date of sale or rental: date on which the deed of sale or lease was stipulated.

How to consult OMI data

The OMI data can be consulted free of charge on the Revenue Agency website, in the section dedicated to the Real Estate Market Observatory. The data is available in the form of:

• quotes: half-yearly reports indicating the minimum and maximum average values ​​of properties by type, location and characteristics;
• graphs: graphs that illustrate the trend in property values ​​over time;
• maps: maps indicating the average values ​​of properties in different areas of the national territory.

OMI data can be used by citizens, real estate operators and public administrations for various purposes, including evaluate the value of a propertyto buy, sell or rent.