Market Value v/s Assessed Value v/s Appraised Value – Understanding the Difference


We often overlook the fact that home prices are never engraved in stone. When you ask a homeowner about the ‘value’ of their home, they will always give a number, a number that according to them is the worth of their house. Proceed to ask them, how they got this number, and in most cases, it’s like hitting the pinata blindfolded.

This is where it gets tricky—pinning down the value of a home. The land and the building or house are worth a certain amount of money, by the value of the property is largely governed by the neighborhood. A house in the competitive Los Angeles market will bring a much higher price to the table as compared to a house in Tulsa.

There are multiple other factors that play a significant role in the pricing of the house. Some of these factors include the recent sales of similar properties, the living quality of the neighborhood, and the condition of the sellable property.

With the overload of information available on the web, where many are fake or incorrect, it is important that every buyer or seller knows the difference. Today the market has become smarter.

Before we step in the murkier water, it is important to understand the different terms associated with selling your property—market value, assessed value, appraised value. While these figures put a number on your property, it is also crucial to have a clear distinction between these numbers.

Market Value

Market values are always consumer-driven. These are the prices that are agreed upon by both the seller and the buyer. Following are the ways that will help you determine the market value of your property:

  • The condition and features of your property
  • Checking similar neighboring properties and their selling value
  • Identifying the latest real estate trends
  • Estimating the number of sellers and buyers in the area
  • Internal and external characteristics of the house

Market value is where you begin for addressing your concerns about the property. For instance, listing agents will use the aforementioned determining factors to ask for a realistic property price. Also, buyers should refrain from completely trusting the sellers ask, they can also ask their own agents to determine the value of the property and suggest a different price (if required).

Private Capital Investors Tip: When to use the market value

Before you decide to go for this option, remember that market value are not appraisals. Therefore, always use this option when you are at the initial stages of determining the property worth. Use this as the starting point.

Assessed Value

Even for those who aren’t interested in selling their property, the information about the assessed value can be quite beneficial. Assessed value helps determine how much property tax you owe towards the public services. Also, the property tax is not dependent on the current property market value.

Identifying the tax incurred is something that assessors deal with. They take into consideration things like similarly valued properties in the market, recent modifications if you are earning any amount from the property, and property replacement costs are also considered. Ultimately, after a mortgage, property taxes are the second biggest expense for the owners.

For instance, if the estimated property market value is USD 200,000 and the tax rate is 80%, then the taxable amount will be USD 160,000. This amount will be used by the government to calculate the estimated property tax.

Private Capital Investors Tip: Why should you find out the highest assessed value?

The higher the assessed value of the property, the more you will have to pay the taxes. In any scenario, if you think that the estimated assessed value is higher, you should check the assessment website of your county.

You will find all the information on this website—for example, wrong foyer, wrong bathrooms, wrong area estimate—which will help in identifying the correct amount owed to the government.

Also, you can contest your assessments through the local body government usually within a set timeframe, which lets the property owners contest the value. However, this does not guarantee that the government will help in adjusting the assessed value, but there are some ways to increase profitability.

Opt for the CMA (Comparable Market Analysis) performed by the local real estate professional. Alternatively, you can also opt for an appraisal to be done on tour property.

Appraised Value

The appraised value only comes into effect when the offer on a property is made and accepted by both the parties, buyer and seller. However, the appraised value does not come into play until the funding is being financed by a lender.

Any buyer who makes a property purchase with cash can negotiate how much they want to pay for the property. When a buyer depends on the mortgage to buy the property, the property will act as the default against the loan. Therefore, the lender will need to establish if the property value is equivalent to manage the mortgage balance.

When looked at holistically, the appraised method is identical to estimating the market value, wherein the appraiser will take into consideration factors such as the quality of the property and comparable property. The distinguishing parameter is that the appraised value will fix an amount that the lender extends for refinancing or purchasing the mortgage.

In numerous scenarios, it has been observed that the appraised values exceed or matches the market value. In such a situation, the lender often approves the mortgage because now the property will serve as the true mortgage value.

Private Capital Investors Tip: Boost the appraised value of your property

For private properties—always the follow the USD 500 rule—the appraises happen only in after USD 500. If you are making a replacement or repair worth or over the stated amount, go for it. It can be as simple as fixing the yard fence or repairing the faucets.

The Asking Price

Now, we have covered the market value, assessed value, and appraised value. There is one crucial aspect yet to discuss, which is the seller asking price, also commonly known as listing or list price.

Asking price is the price at which a particular property is listed. The value for the price is often set by the seller, usually with the suggestions from a real estate agent. Usually, the seller has professionally appraised their home, to understand the current market standing. Whichever option you choose as a seller, always remember that never pull the number out of the thin air, speak to a professional and get the best property price.

Important learnings:

  • Property owners should always focus on understanding the current market value of their property because that will help set the correct offer price. Realistically speaking, it the market that will set the value on your property as per the current market standards.
  • Remember that low appraisals can happen. Probably the property was priced too high, or they are refraining because the market values are decreasing due to fewer buyers. When stuck in this situation, always look for alternative solutions around it.
  • There are always options to challenge your assessed values. However, know that your property will not be accessed annually, and this frequency will vary in every state. Therefore, always find out your county or state’s process.

Before you finalize any property, it is important to know about these three different values and understand the difference between them.

  • Always consider the market value and base your offer on the same. Eventually it the market decides the best value for your property
  • The assessed value will help you identify property taxes, but it is not helpful during making the offer or when negotiating
  • The appraised value is also important, but always consider this option along with the market value.

As you continue or prepare for your property journey, ensure that you have taken your finances into consideration. Whether it is opting for a loan or choosing to refinance the current mortgage for better monthly savings, you can seek help from professionals for the same. After reading all these it is difficult for any owner – residential or commercial, measuring the right valuation of your property is difficult. Whether its market value or appraised value, you will always need help. So, it is important to hire an experienced real estate advisor because they will give you a properly assessed value.

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