When people talk about the value of their homes there is a wide variety of terminology…one home could have many different values. Between, the appraised value, listing price, market value and assessed value, who can keep it straight? But like anything else, there is more than one answer to the question. Hopefully we can help you understand the basis behind all the terms regarding “value”.
Appraised Value is a term that refers to an appraiser’s opinion of value on a specific date. The appraised value of a property is the determination of an exact number regarding its value. It is determined by gathered data and judgement by the appraiser. Appraisal reports are written for a variety of clients for specific purposes including (but not limited to) estates, pre-foreclosure valuations, home equity lines, renovation loans and relocation appraisals. For example, the relocation company may want to sell a property within 90 days while similar properties are typically taking 6 months to sell. In this case, the Anticipated Sales Price opinion might be less than the Market Value due to the time constraints of the relocation company wanting to retain the property. So depending on the constraints and parameters from the clients there would be an impact on the appraised value. Each written appraisal report identifies the specific type of value being used in that appraisal, based on what is appropriate for the purpose of the appraisal. The market value and the appraised value can have more of a variance due to the purpose of the appraisal.
Market Value is the most common type of value opinion and basically refers to how much a typical buyer will pay a typical seller if the property is exposed to the open market for a typical length of time. The definition of Market Value from Fannie Mae is the most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. The lender needs to know this value before lending for purchases, refinances, or home equity. It closely mirrors what most people associate with value. It typically answers the question “What would a person ordinarily pay for my home?” The big difference between the appraised value and market value is the role of the buyer. Buyers have the biggest influence over the market value because a property is worth only what they are willing to pay for it. Market value is open to interpretation: buyer’s preferences, feelings and motivations are items that drive and having amenities home buyers are looking for, potential buyers are likely to pay a higher price, raising the market value of the property. The appraised value is based on data from the comparable sales of similar homes.