What is the difference between market value and appraised value?

If you are planning to sell your home in the near future, you might be curious about the difference between a market value and an appraised value.

An appraised value is the home value (or the estimated dollar amount your home is worth) in its current state at a given point in time, and its value is estimated by a certified appraiser. The appraised value is required by lenders as part of the loan application process. The fee to have your home appraised ranges between $200 to $300.

A market value is the price your home is estimated to sell for based on the current market. The analysis of the market or estimation of your home’s market value is comprised from sales of comparable properties and is usually performed by a real estate agent or broker.

Both values are accurate ways to determine the worth of your property.

Most homebuyers don’t think about the status of the market when they decide to buy or sell a property because they are more focused on where they plan to live. However, it’s definitely a good thing to keep in mind because it can help you determine how to move forward.

BUYER’S MARKET

If a buyer is looking to purchase a home, an ideal situation would be one where there are more homes available than buyers to purchase them. This is considered a buyer’s market. The buyer has more options to choose from and increases the odds of locating the perfect home. Serious sellers are usually willing to negotiate with buyers in this type of market. The buyer may even be able to purchase a home below its list price, and the seller may offer to pay some (or all) of the closing costs.

Characteristics of a Buyer’s Market: high inventory compared to previous months and/or years, more than six months of inventory available, real estate ads growing in size, For Sale signs staying up for longer periods of time, median sales prices declining

How to Compute Months of Inventory:

# of active listings in the past 30 days / # of sold or closed transactions in the past 30 days

For example, if there were 4,200 active listings in the past 30 days and only 600 sold or closed transactions, the months of inventory would be 7.

SELLER’S MARKET

If a homeowner is hoping to sell their home,  an ideal situation would be one where more buyers want to purchase a home than the number of properties available to buy. This is considered a seller’s market. Sellers are likely to sell their home much more quickly, and often, they sell it for more than the listing price.

Characteristics of a Seller’s Market: low inventory compared to previous months and/or years, less than six months of inventory available, unwavering sales numbers, flat median sales prices, advertising remains unchanged, Pending or Sold signs frequently displayed