What is the difference between appraisal and market value?
Key Takeaways
| Appraisal Value | Market Value |
|---|---|
| An objective and evidence-based opinion of value by a licensed appraiser | A subjective and negotiated price by buyers and sellers |
| Based on market data, comparable properties, and the condition and features of the property | Based on supply and demand, preferences, emotions, and other subjective factors |
| Affects the amount of money that lenders are willing to lend for a mortgage | Affects the attractiveness and competitiveness of a property |
| Can differ from market value depending on the market conditions, the type and location of the property, and the motivation and expectations of the parties involved | Can differ from appraisal value depending on the market conditions, the type and location of the property, and the motivation and expectations of the parties involved |
| Can be prepared for and dealt with by sellers and buyers with the help of a professional estate agent | Can be estimated and negotiated by sellers and buyers with the help of a professional estate agent |
Introduction
If you are planning to sell or buy a property, you may have heard the terms appraisal and market value. These are two different concepts that reflect different perspectives on the value of a property, and understanding them can help you make informed decisions. However, many people confuse or use these terms interchangeably, which can lead to misunderstandings or disappointments.
In this article, we will explain the difference between appraisal and market value, and how they can affect a real estate deal. We will also provide you with some tips on how to prepare for an appraisal, how to deal with appraisal contingencies, and how to negotiate the best price based on the market value. Finally, we will show you the benefits of working with a professional estate agent, who can help you navigate the complex and dynamic real estate market, and provide you with expert advice and guidance on appraisal and market value.
By the end of this article, you will have a clear understanding of what appraisal and market value are, and how they can help you sell or buy your property with confidence and ease.
Factors that influence appraisal and market value
Appraisal value and market value are two different ways of measuring the value of a property. They are influenced by different factors, and they can vary depending on the situation. Let’s look at each of them in more detail.
Appraisal value
Appraisal value is an objective and evidence-based opinion of value by a licensed appraiser. An appraiser is a professional who is trained and certified to evaluate the value of a property using market data, comparable properties, and the condition and features of the property. An appraiser follows a set of standards and guidelines to ensure consistency and accuracy in their work.
An appraisal is usually required by lenders when they are financing a mortgage, as they want to make sure that the property is worth the amount of money they are lending. An appraisal can also be requested by sellers or buyers for other purposes, such as tax assessment, divorce settlement, or estate planning.
An appraisal report typically includes the following information:
- The purpose and scope of the appraisal
- The description and location of the property
- The market analysis and trends
- The valuation approach and methods
- The comparable properties and adjustments
- The final opinion of value
- The qualifications and signature of the appraiser
The appraisal value is based on the date of the appraisal, and it may change over time as the market conditions, the comparable properties, and the condition and features of the property change.
Market value
Market value is a subjective and negotiated price by buyers and sellers. Buyers and sellers are the ones who ultimately determine the value of a property, based on their willingness and ability to pay or accept a certain price. Market value is influenced by supply and demand, preferences, emotions, and other subjective factors that may not be reflected in the appraisal value.
Market value is not a fixed or definite number, but a range of possible prices that buyers and sellers are willing to agree on. Market value can also vary depending on the type and location of the property, and the motivation and expectations of the parties involved. For example, a property that is in high demand has unique features or has a special buyer may have a higher market value than a similar property that is in low demand, has common features, or has a typical buyer.
Market value can be estimated by a professional estate agent, who can perform a comparative market analysis (CMA). A CMA is a free service that estimates the market value of a property based on recent sales and listings of similar properties in the area. A CMA can help sellers and buyers to price their property realistically, and to negotiate the best deal possible.
The market value is based on the date of the sale, and it may change over time as the market conditions, comparable properties, and the preferences and emotions of buyers and sellers change.
Implications of appraisal and market value for Sellers and Buyers
Appraisal value and market value are not only different concepts, but they also have different implications for sellers and buyers. Knowing how they can affect a real estate deal can help you prepare for and deal with potential challenges or opportunities.
Implications of appraisal value
Appraisal value affects the amount of money that lenders are willing to lend for a mortgage. If the appraisal value is lower than the agreed sale price, the lender may not approve the loan, or may require the buyer to make a larger down payment or pay for private mortgage insurance. This can jeopardize the deal, or require a renegotiation of the price or the terms of the contract.
To avoid or minimize the risk of a low appraisal, sellers and buyers can do the following:
- For sellers:
- Prepare the property for appraisal by making repairs, improvements, and cleaning.
- Provide the appraiser with a list of recent upgrades and their costs, as well as any relevant information about the neighbourhood or the market.
- Challenge the appraisal if they think it is inaccurate or unfair, by providing evidence of higher comparable sales or pointing out errors or omissions in the appraisal report.
- For buyers:
- Review the appraisal report and make sure it is accurate and complete.
- Negotiate with the seller or the lender to lower the price, split the difference, or find other solutions.
- Walk away from the deal if the appraisal is too low and the seller is unwilling to budge, or if the buyer cannot afford the additional costs.
Implications of market value
The market value affects the attractiveness and competitiveness of a property. If the market value is higher than the appraisal value, it means that the property is in high demand, has unique features, or has a special buyer. This can indicate a strong market or a favourable situation for the seller.
To take advantage of or cope with a high market value, sellers and buyers can do the following:
- For sellers:
- Price the property realistically, based on a comparative market analysis by a professional estate agent.
- Market the property effectively, by highlighting its features, benefits, and advantages over other properties.
- Negotiate the best deal possible, by being flexible, responsive, and confident.
- For buyers:
- Research the market and the property, by looking at recent sales and listings of similar properties, and visiting the property in person.
- Make a competitive offer, by being pre-approved, offering a large earnest money deposit, and writing a personal letter to the seller.
- Be prepared to walk away, if the market value is too high and the seller is unwilling to negotiate, or if the buyer cannot afford the property.
Benefits of working with a professional estate agent
As you can see, appraisal and market value are complex and dynamic concepts that can have a significant impact on a real estate deal. That is why it is important to work with a professional estate agent, who can help you navigate the market, and provide you with expert advice and guidance on appraisal and market value.
A professional estate agent can help you with the following:
- Perform a comparative market analysis, which is a free service that estimates the market value of a property based on recent sales and listings of similar properties in the area.
- Prepare the property for the appraisal, by making repairs, improvements, and cleaning, and providing the appraiser with relevant information and evidence.
- Challenge the appraisal, if it is inaccurate or unfair, by providing evidence of higher comparable sales or pointing out errors or omissions in the appraisal report.
- Market the property effectively, by highlighting its features, benefits, and advantages over other properties, and attracting qualified buyers.
- Negotiate the best deal possible, by being flexible, responsive, and confident, and finding solutions for potential challenges or opportunities.
- Handle the paperwork and the legal aspects of the transaction, by ensuring compliance with the laws and regulations, and protecting your interests and rights.
If you are looking for a professional estate agent in South-West LondonSLM London is the best estate agency for sellers and buyers in the area. SLM London is a local and independent estate agency that offers a range of services, including buying, selling, and renting properties. We have a team of experienced and friendly estate agents, who are committed to providing you with a high-quality and personalised service. We also have a deep knowledge and understanding of the local market and can help you sell or buy your property with confidence and ease.
To find out more about SLM London, Contact Us for a free market appraisal and a professional service that will exceed your expectations.
Conclusion
Appraisal and market value are two different concepts that reflect different perspectives on the value of a property. Appraisal value is an objective and evidence-based opinion of value by a licensed appraiser, while market value is a subjective and negotiated price by buyers and sellers. Appraisal value and market value are influenced by different factors, and they can vary depending on the market conditions, the type and location of the property, and the motivation and expectations of the parties involved. Appraisal value and market value can also have different implications for sellers and buyers, and they can affect the amount of money that lenders are willing to lend for a mortgage, the attractiveness and competitiveness of a property, and the outcome of a real estate deal.
Understanding the difference between appraisal and market value, and how they can affect a real estate deal, can help you make informed decisions and prepare for and deal with potential challenges or opportunities. Working with a professional estate agent can also help you navigate the complex and dynamic real estate market, and provide you with expert advice and guidance on appraisal and market value. If you are looking for a professional estate agent in south-west London, we recommend SLM London, the best estate agency for sellers and buyers in the area.
We hope you found this article helpful and informative. If you have any questions or comments, please feel free to contact us. We would love to hear from you. Thank you for reading.
