The bid-ask spread is the distance between what sellers are asking and what buyers are willing to pay. In a market with few transactions it is the clearest description of what is happening: a wide spread means the two sides are pricing off different information, and deals stop clearing until one of them moves.
- A wide spread explains a slow market better than any volume statistic, because it names the reason nothing is trading.
- It closes from both sides, and rarely at the same speed. Watch which side is moving before deciding what a market is doing.
- Motivation narrows it faster than argument. A maturity, an estate or a partner split moves a seller further than any comp will.
- Asking prices are public and bids are not, so the visible half of the spread is always the seller's half.
The same eight units: the asking price against the value the income supports at a 6.0% cap.
Twenty percent is not a negotiation, it is two different theories of the same building. One of them has to be abandoned before there is a deal.
Related terms
All termsTransaction Volume
Transaction volume is how much actually traded in a market over a period, counted in deals, in units, or in dollars.
MarketsComparable Sale
A comparable sale is a closed transaction used as evidence of what a subject property is worth.
InvestmentCap Rate (Capitalization Rate)
The capitalization rate is a building's net operating income divided by its price, expressed as a percentage.
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