Appraised Value vs. Market Value Explained
The key differences between appraised and market value, and why both matter when buying or selling.
Austin Beverigde
Tennessee
, Goliath Teammate
Understanding the difference between appraised value and market value can be confusing, especially if you're buying or selling a property. Many people struggle to grasp how these two terms affect their real estate decisions. This article will clarify these concepts and help you make informed choices.
Quick Answer: Appraised value is the value determined by a professional appraiser based on specific criteria, while market value is the price a buyer is willing to pay in the current market. Understanding both can help you set realistic expectations whether you're buying or selling a property.
What is Appraised Value?
Appraised value is an estimate of a property's worth, determined by a licensed appraiser. This value is often used in mortgage lending to ensure that the loan amount does not exceed the property's value.
How is Appraised Value Determined?
Appraisers consider various factors, including:
Property size and layout
Location and neighborhood trends
Condition of the property
Comparable sales in the area
What is Market Value?
Market value is the price a buyer is willing to pay for a property in the current market conditions. It reflects the property's perceived value based on demand and supply.
Factors Influencing Market Value
Market value can fluctuate due to several factors, including:
Current real estate trends
Economic conditions
Interest rates
Buyer competition
Key Differences Between Appraised Value and Market Value
While both values are important, they serve different purposes:
Purpose: Appraised value is used for lending, while market value is used for buying/selling.
Determination: Appraised value is calculated by a professional, whereas market value is influenced by buyer behavior.
Stability: Appraised value tends to be more stable, while market value can fluctuate rapidly.
Real-World Example
Imagine you have a home that an appraiser values at $300,000 based on its condition and comparable sales. However, due to a housing shortage in your area, buyers are willing to pay $350,000. In this case, the appraised value is lower than the market value, which could affect your selling strategy.
Checklist for Understanding Values
Know the purpose of each value in your transaction.
Research recent sales in your area for market value insights.
Hire a qualified appraiser for an accurate appraised value.
Stay updated on market trends that may affect your property's value.
Consult with a real estate professional for personalized advice.
Common Mistakes to Avoid
When navigating appraised and market values, avoid these common pitfalls:
Assuming appraised value equals market value; they can differ significantly.
Ignoring local market trends that can affect market value.
Neglecting to get a professional appraisal when selling a home.
Overpricing your home based on outdated market data.
FAQs
What is the main difference between appraised value and market value?
The main difference is that appraised value is determined by a professional appraiser based on specific criteria, while market value is the price buyers are willing to pay in the current market.
Can market value be higher than appraised value?
Yes, market value can be higher than appraised value, especially in competitive markets where buyers are willing to pay more than the appraised amount.
How often should I get my property appraised?
It's advisable to get your property appraised when making significant financial decisions, such as selling or refinancing, or if you suspect changes in market conditions.
Does an appraised value affect my property taxes?
Yes, appraised value can influence property taxes, as local governments often base tax assessments on appraisals.
What should I do if my appraised value is lower than expected?
If your appraised value is lower than expected, consider discussing it with the appraiser, reviewing comparable sales, or adjusting your selling strategy accordingly.
