Difference between Market Value and Appraised Value
A lot of consumers wonder if the market value and the appraised value of a property are the same and if not, what are the differences. The article will provide you an explanation of why they are not and how at times they can be significantly different. We will detail it out below.
A home appraisal is performed by a licensed professional known as a field appraiser. These appraisers are tasked typically for providing an inspection and report by mortgage lenders, banks and other various financial institutions typically due to a consumer applying for a mortgage. The appraiser provides a valuation of the property based on recent sales of similar properties in the same geographic area. Appraisals provide lenders with the confidence the home is sound collateral for any mortgage being placed on it. Typically, the appraisal fee is paid by the buyer/borrower.
What do appraisers look for when searching for the proper comparable sales to be included in their report. Here are a few of many items they consider:
- Size of the home focusing on the square footage, number of bedrooms and bathrooms
- Geography or location of the home
- Age of the home
- Condition of the home – what improvements or updates have been made to the home
- Recency of the sales – typically appraisers will look for homes which have sold in the last 6 months
- School district – making sure comparable sales are in the same school district as the house they are purchasing is in
Market Value on the other hand can vary from appraised value. The reason being a seller may be willing to pay any amount for a home whether the appraiser could support the value. That is why in a seller’s market home prices tend to rise as there are too many buyers and too few sellers.
As always, please use a trusted real estate agent and mortgage professional when looking to buy or sell a home or obtain a mortgage.
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