by Dell Claiborne
What is the difference between the market value and appraised value of a home? Shouldn’t they be the same amount?
Market value simply is whatever buyers are willing to pay for your property. If most buyers who see your home offer you $250,000 then the market value of your home is $250,000. Market value is an inexact science, but very important, because the market value will most likely be reflected in the actual sales price. Appraised value is a little more involved. To determine the appraised value, a licensed appraiser must evaluate a number of factors such as previous sales history in your area and property condition and also submit their findings to the bank. The appraised value is what the bank uses to make sure that the property is worth at least the amount that the borrower is asking them to lend. Put another way, the appraised value is what the bank thinks a property is worth.
So should they be the same? I can’t give you a definitive answer to that. Market conditions will affect both values. In a perfect world they will hopefully be close. Market value will always be affected by consumers not wanting to pay full price for anything. Do you know anyone that goes to the car dealership and just pays the sticker price? However, market value will always affect appraised value, because past sales price is among the criteria used by appraisers to determine appraised value.