What's the Difference Between Market Value and Appraised Value?

What's the Difference Between Market Value and Appraised Value?

Market value and appraised value are common terms in real estate, and though it may seem as though they’re used interchangeably, they’re not always the same. This can be confusing for first-time buyers.

Market Value

The market value of a home is its current value, meaning the price a buyer would likely pay for the home at that time. More specifically, it is the price a buyer would be expected to pay in a fair-market sale, where the home is exposed to an open market and neither buyer nor seller is unusually pressured. If a home has just been sold in a fair-market transaction, the sold price is the market value.

Appraised Value

If a home has not sold recently, its market value can be approximated with an appraisal. An appraiser typically views the inside and outside of a home and completes a detailed report comparing it to similar homes recently sold in that area to determine the most likely value. Appraisers consider many details when comparing homes, and two appraisers may come up with different values for the same home.

Appraisals are also used by lenders when issuing mortgages, to ensure that homes are worth what buyers have agreed to pay. If a lender’s appraiser determines that a home’s value is the same as the sale price agreed to by the buyers and sellers, then for that home the market value and appraised value are the same. If the lender’s appraised value is lower than the sale price but the seller agrees to reduce the sale price to the appraised value (not a given), the market value and appraised value would then also be the same.

For more about appraisals, see my article, How an Appraisal Contingency Protects Your Interests. Also see my articles on related real estate topics. What topics would you like covered? Send your ideas to annette@preferredhomes.com

If you’re planning to buy or sell a home, contact me at (610) 247-7892 or annette@preferredhomes.com

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