Full Market Value
With multiple offers, the true market value of the home will typically be the highest bid from a willing and able buyer. The true value of a home, after all, is what a buyer is willing to pay for it. This is where the appraised value falls short.
Assessed value is the dollar value assigned to a home or other property for tax purposes. It takes into consideration comparable home sales, location, and other factors. Assessed value is not the same as fair market value (what the property could sell for) but is often calculated as a percentage of it.
Remember to protest market value and unequal appraisal. Request the appraisal district's hearing evidence package.
The appraiser's primary role is to determine the fair market value of the property based on objective factors such as its condition, location, comparable sales, and market trends. The appraised opinion of value may be the same or very close to the contract price however, it may also be considerably higher or lower.
Do sellers usually lower their asking price if the appraised value is lower? Whether the seller decides to lower their asking price will depend on a number of factors, including how motivated they are to sell or if they have other offers above asking price.
There's often an addendum that allows buyers to back out without losing their earnest money deposit if the appraisal doesn't match the offer price. If the sellers stand firm and don't want to budge on price, the deal might fall through, sending the buyers back on their search for the perfect home.
If a property is under contract for purchase at $450,000 and an appraiser provides a market value appraisal of $425,000 for the property, the $450,000 sale price is a fact, while the $425,000 appraised value is the appraiser's opinion. The $450,000 price is what the property is actually selling for.
Appraised value estimates a property's general worth as determined by a home appraiser and is used in the mortgage approval process. On the other hand, the assessed value is determined by local tax assessors and affects how much you'll pay in property taxes.
If you sell to a buyer with financing, their lender will order another appraisal before closing to protect themselves from lending more than the house is worth. In that case, it's ideal to list right at the appraised value, or even a little under, so the deal goes smoothly.
While numbers and formulas often determine an appraisal value, the fair market value is what a buyer is willing to pay. For instance, if your business's appraised value is $1 million and you can only find buyers at $750k, the fair market value is $750k.
The assessed value is typically, but not always, lower than the market value because it does not examine current market conditions. The assessed value is based on factors that might include the size, location, and condition of the property, which are unlikely to change over time.
Finally, states like Michigan and California cap the amount of taxable growth that can happen. California may show an assessed value from someone that has held the property for a decade or more and only had growth of 2% annually. The market in the last 10 years is substantially more than that.
Many contracts contain a loan contingency, so if the appraisal comes in low, the buyer cannot buy the property under the contract's terms and can then cancel the contract. One option is that a buyer can make up the difference in cash and take the loan for the lower amount.
In summary, while market value reflects the estimated value of the asset based on empirical data and conducted by an unbiased third party, investment value or worth is the subjective value of the asset to a specific individual with a unique strategy and risk profile.
A car appraisal is an official estimate of your vehicle's fair market value. This standardized process is often performed by one of our trained appraisers. Typically, you'll need an appraisal whenever you're attempting to trade in or sell your vehicle to one of our dealerships.
No. A home's appraised value is the opinion of a licensed, objective appraiser. This professional assessment is typically used by the buyer's mortgage lender as a kind of safety precaution, to make sure that the home is worth the loan amount. Appraised values are often lower than fair market values.
Assessed value is used mostly for property tax purposes. A lower assessment means a lower tax bill. Home buyers and sellers, on the other hand, look more to marketplace value than at property tax data.
There's an acceptable variance when it comes to home appraisals. It usually depends on the prevailing market conditions. In markets with favorable conditions, the difference should be between 2% and 3% of the other values. For markets with challenging conditions, a 10% difference may be acceptable.
Most appraisals come in at the right price. According to a report by Corporate Settlement Solutions (CSS), only about 8% of properties sold in the first half of 2024 sold for more than their appraised values.
In 2020, 42% of properties were appraised for more than the sale price. This share was 42% in 2021, 46% in 2022 and 50% in 2023. The average percentage value of an over-appraised property in 2024 so far is 8.9%.
It's very rare for a seller to back out of the deal on their home due to the appraisal being higher than the offer because the seller doesn't typically see the appraisal—it's just between the buyer and their lender.
While a significant difference between market and appraised values is uncommon, it can happen. As a real estate agent, it's your job to weigh the factors that go into each to determine your pricing strategy.
In a seller's market, where sellers hold more negotiating power, they'll have little incentive to lower their price in response to a low appraisal. In all likelihood, the buyer will have to make up the difference in the purchase price and the loan amount the lender is willing to offer.
Can you sell a property for more than its value? Yes, selling a property for more than its value is possible, but it is easier to do so in a seller's market since there is higher demand.