_:n8755eaffd4754ace89c5f722645cec5bxb0
<http://schema.org/articleBody>
"When I first began buying properties, I was quick to discover that when you’re asking yourself “How much is this property worth?” the answer is, almost always “It depends who you ask.”  You see, the same house could be worth $300,000 according to an appraisal, while it is on the market for $255,000 and ultimately sells for $280,000. With this sort of situation cropping up every day, how are you to know what is the “right” price to pay?\r\n\r\nWhat is the difference between market value and appraisal value? The appraised value is an exact number given by an impartial professional who uses a combination of current data and their experience to determine what the property is worth. The market value is consumer driven and is the price a buyer is willing to pay for a property, regardless of the appraisal value.\r\n\r\nAt first glance, this difference might not seem important. However, when you’re buying a property, there are many reasons why it is essential to take both values into consideration. Let me save you time, money, some headaches, and a lot of stress by sharing what I have learned with you.\r\nThe Appraisal Value Vs. The Market Value\r\nThe world of real estate is awash with different phrases for how much a property is “worth.” The thing is,  there are different kinds of worth.\r\n\r\nFirst, there is how much a property sells for, and this is known as the market value. The market value is set through a combination of objective facts, such as how many bedrooms the house has, plus subjective elements such as the feelings of the buyer and seller. Generally, the seller and realtor are trying to maximize the sale price while the buyer is trying to purchase the best home possible within their budget.\r\n\r\nFor these reasons, the market value is variable, sometimes from week to week, and it will depend on who you ask. Market value is usually set by a licensed real estate professional although, in theory, anyone could legally make a determination of the market value of a property.\r\n\r\nSecond, there is the appraised value. This is how much a property is said to be worth when it is measured against a set of fixed criteria. These criteria are applied, in the same way, to every property. An appraisal value can only be determined by a qualified, professional, licensed appraiser. The appraiser must have no personal or professional stake in the property transaction. The appraised value cannot be set by a real estate professional.\r\n\r\nThe appraised value will remain fairly constant, although it can increase or decrease over time. It will not fluctuate according to how much someone does or does not love the house in the way the market value can.\r\nDetermining Market Value\r\nThe market value is usually set by a real estate professional who has experience in the local area and has reviewed the details of a number of comparable properties. They will take into account the size of the home, the location, and other factors such as transit links, up and coming developments in the area, and school catchment areas.\r\n\r\nOnce they have this information the real estate agent will look at the detail of your specific home including any value-added items such as a new kitchen, a pool, or an area of the house that could be a separate rental.\r\n\r\nFinally, there are elements you can change to increase the market value. Your realtor may suggest redecorating, landscaping the yard or staging the house in a particular way to optimize the appeal to buyers.\r\n\r\nBecause the market value depends, in some part, on personal opinion, different realtors may give different valuations for the same property.\r\nDetermining Appraised Value\r\nAn appraiser will also look at similar properties in the neighborhood. In fact, they will have to include details of the comparables they reviewed in the final appraisal report. They will then visit the home in question and will review particular elements against a fixed set of criteria. The same criteria are in use by the appraiser during every evaluation, for every home. They are completely impartial.\r\n\r\nHowever.\r\n\r\nThe appraiser will not be considering your choice of paint color and the appeal, or otherwise, to potential buyers. The impact on the value of your home of these type of features depends on what people want. It is down to what’s fashionable in the market at the moment, or specific quirks that might interest a buyer. For this reason, an appraiser will not include subjective elements in the appraised value. As a result valuations by different appraisers should be more or less the same.\r\nWho Decides The Different Values?\r\nThere are distinct differences between who calculates the market valuation vs. the appraised valuation.\r\n\r\nMarket Valuation\r\n\r\n \tUsually set by a real estate agent, but if the seller is not using a realtor, the seller or anyone else can decide on the market value.\r\n \tReal estate professionals will have experience in estimating the likely sale price of a home, but they will not necessarily be able to give the final sale price.\r\n \tThe seller is entitled to ignore a real estate agents advice and put their home on the market for any price they wish.\r\n \tThe final market value of a property is ultimately decided by what the buyer is willing to pay. Therefore, technically speaking the market value is arrived at by the real estate agent, the seller, and the buyer.\r\n\r\nAppraised value\r\n\r\n \tOnly a qualified professional can make an appraised evaluation of a property.\r\n \tAppraisers must have at least 100 hours classroom training. They must also have 1000 hours of supervised work and pass professional exams before becoming licensed.\r\n \tThere are national standards for how an appraiser works, reviews the value of a property and reports their findings.\r\n \tOther peoples opinions are not relevant for appraisal values.\r\n\r\nWhat Does An Appraiser Consider?\r\nThe majority of the countries appraisers use a standard appraisal form that asks them for:\r\n\r\n \tPhotographs of the front of the property that is the subject of the appraisal. Plus - photos of the front of the three other properties that were the comparative examples.\r\n \tA hand-drawn floor plan and details of the square footage of the home. They must also give details of their calculations.\r\n \tThe percentage of the surrounding neighborhood that is single-family homes. Not only that but the percentage of duplexes, multi-family units, commercial, and other types of property in the neighborhood.\r\n \t“Adverse” conditions such as being in a FEMA flood zone, air quality issues, even neighborhood smells.\r\n \tDetails of the structural integrity of the building.\r\n \tWhether the building is in keeping with the rest of the homes in the neighborhood.\r\n\r\nIn addition, there are standard items you might expect, including the number of rooms, etc.\r\n\r\nThe appraiser will look at all of the elements in which they have training. They will use their knowledge and experience, determine a “sales comparison” value.  If requested by the lender they may also provide an “income approach” appraised value. This will say how much the property might be rented out for. There is also a “replacement approach” appraisal value. This tells you how much it would cost for a rebuild of the property to its current standard.\r\nWhat Happens If The Appraised Value And The Market Value Are Different?\r\nAppraisal values can be used to determine home loans, insurance, tax losses, estate valuation, bankruptcy and liquidation, and net worth.\r\n\r\nIf you are applying for a loan to buy your home, the lender will use the appraisal value to calculate the size and terms of your loan. If the appraisal value is more than the market value then there will be no issues in this area.\r\n\r\nHowever.\r\n\r\nWhat if the market value, and the price you are paying for the property, is more than the appraised value? Then the lender is likely to require a larger deposit from you. The worst-case scenario is that they may not offer a loan in the amount you need.\r\n\r\nLikewise, if you are purchasing a property with cash there is one thing to consider. How sound your investment is if the appraised value is significantly less than the market value?\r\nWhich Is Most Important Appraisal Value Or Market Value?\r\nWhich of the two values is most important depends on where you are in the property transaction.\r\n\r\nIf you are applying for a loan, then both are equally important. You will want as low a market value as possible. This will mean you are borrowing less and subsequently have lower costs over the term of your loan. You also need the appraisal value to be more than the market value. It must be higher to prevent your lender asking for you to contribute a larger deposit.\r\n\r\nIf you are the seller, you may be focussed on the market value, but you need to take the appraisal value into account because it will impact your potential buyers."
<https://realestateinfoguide.com/what-is-the-difference-between-market-value-and-appraised-value/>