FAQ #2:  What’s the Difference Between Appraised Value and Market Value?

If you’ve been following me for any length of time, you know I’ve talked a lot about market value.  And, the reason for this is that there is so much confusion around this term.  Way too many people still think that market value is simply what a buyer is willing to pay for a property.  But that’s usually not the case.  If you’d like to learn more about market value, read this blog post from a past series dealing with that topic.

For now, let’s just sum market value up by using an abbreviated definition from Fannie Mae.  

“Market value is the most probable price which a property should bring in a competitive and open market.”  A couple of things I always like to point out are that the buyer and seller must be typically motivated, and both parties must be well informed and be acting in their own best interest.

The appraised value is simply a term used to describe the appraiser’s opinion of value as of a specific date.  The appraised value may be an opinion of market value (as is often the case in a typical refinance or purchase transaction), but it could also be a liquidation value as in the case of foreclosed properties, or an anticipated sale price used for relocation purposes.  

To sum it up, market value is determined by market participants, whereas appraised value is determined by the appraiser.  An appraiser does not determine market value, but rather often develops an opinion of market value, based on the actions of buyers and sellers in the market.

This is one of those gray areas, and is often a bit confusing, because the terms are so interconnected, but hopefully this short answer to a common question will help clear things up for you just a bit!  

Committed to helping you understand your home’s market value,

Ryan Bays, SRA, AI-RRS