When it comes to buying or selling a home, you will encounter several exciting and challenging decisions along the way. Trying to place a precise value on a home can be a difficult task, considering all the factors that go into it, and the nature of a constantly changing market. Two terms that you should become very familiar with during your homebuying or selling journey are “market value” and “appraised value”. Before we discuss the differences, let’s outline exactly what each of these terms mean.
Market value is essentially what the buyers are willing to pay for a home, aside from what the sellers list it for. Just like a traditional market, buyers and sellers have the option to negotiate a deal. There are several factors that can determine market value:
- Comparable listings (comps) of similar homes in the area
- Property features and overall condition
- Reviewing current real estate trends
Essentially when you hear the term “market value”, it’s the price a seller can reasonably expect to secure for his or her home. Typically, real estate agents will do a market analysis and compare a home to other houses that were recently sold or listed to come up with a competitive price. It’s important to remember that market values are not official and should only be a starting point in determining a home’s worth.
The appraised value of a home is determined by a third-party licensed appraiser. When a buyer is needing to secure a mortgage, the lender will order an appraisal before they approve a buyer’s loan to help minimize the risk. If the appraisal comes in lower than the offer, buyers and sellers can renegotiate the deal, or the buyer can essentially choose to walk away.
A few factors that determine appraised value are:
- Square footage
- Code compliance
- Interior/exterior condition
- Comparable listings of other homes in the area
Each appraiser will take a different approach to their home inspection, while also looking at the value of other homes as a part of their decision-making process. It’s important to note that the appraised value is not up for negotiation like market value is.
In summary, market value and appraised value are two different ways to determine the value of a home. Market values are decided by buyers and sellers, and appraised value is calculated by a licensed appraiser. A property’s market value is more subjective to what an average buyer is willing to pay for a home and can fluctuate depending on the market at a specific time, whereas an appraised value is objective, determined by a third-party, and is not so easily changed.
Buying or selling a home is a big commitment! All of our agents at Marsh Landing Country Club Realty are well versed in helping you navigate the complexities of listing or buying a home and are ready and willing to assist you. We want to do whatever it takes to make sure you find the home of your dreams! Contact us today to get started.