Appraised Value vs. Market Value: Understanding the Difference
Understanding the difference between Appraised Value and Market Value can be confusing. Learn the key differences between them and how each affects the sale of your property in this informative article!
Appraised Value vs. Market Value: Understanding the Difference
When you are buying or selling a home, it's important to understand the distinction between an appraised value and a market value. The two terms are often used interchangeably, but they are not the same. Appraised value and market value are two different assessments of the value of a home, and they are determined in very different ways.
Appraised Value
Appraised value is the estimated market value of a home determined by an appraiser, an independent professional who evaluates a home and then determines its value. The appraised value isn't a guarantee of sale price, but a value used in determining the risk to lend money on the home. In the appraisal, the appraiser takes into account the physical characteristics of the home, such as square footage, the condition of the kitchen and bathrooms, and the number of bedrooms and bathrooms, as well as the home's location, age, and style. The appraiser also takes into account comparable sales in the area to determine the value of the home.
Market Value
Market value, on the other hand, is the value of a home based on what buyers in the relevant market are willing to pay for it. Market value reflects the actual sale prices of homes that have recently sold in the area, and is determined by the current market trends, such as the strength of the economy, the performance of the housing market, and the availability of housing. Market value fluctuates much more than appraised value; in a boom market, the market value could be much higher than the appraised value, and in a downturn market, the market value could be lower.
The Bottom Line
The appraised value and the market value of a home can be different. It's important to understand the difference between the two values and the different ways they are determined when you are buying or selling a home. Understanding the distinction between appraised value and market value can help you make an informed decision and ensure that you get the best possible deal.