I am often asked, “how does appraised value differ from market value?” An appraisal is a report of a home’s value usually prepared for a lender. Appraised values are based on gathered data and the professional judgment of the professional conducting the appraisal. The market value has more variance than the appraised value. Unlike the appraised value, buyers have influence over the market value of a property because a property is only worth what a buyer is willing to pay.

For example, a seller may list his property for $300,000. The buyer offers the seller $240,000. The seller accepts the buyer’s offer. According to the buyer and the seller, the market value of that particular property is the $240,000; the agreed upon purchase price. If bank financing is involved, an appraiser is brought in to establish the appraised value of the property. The appraiser factors in recent property sales in the neighborhood, the features and functionality of the home, the condition of the home and a number of other details. Lets say the appraiser decides that the property is worth $260,000. In this particular example, the buyer is walking into the home with $20,000 equity. The appraised value is the one that the bank will use for lending purposes. In most cases, the appraised value does override the market value. Once the buyer and seller have entered into a contract to purchase, the appraised value does NOT allow the seller to increase the purchase price of the home.

If the home appraises for less than its purchase price, there are a few potential outcomes:

• Seller and buyer renegotiate a new, lower home sale price.
• Buyer increases the down payment to meet new loan to value and down payment minimums.
• The seller and buyer cancel the home purchase contract (Pogol, 2019).

If you would like a free market value analysis of your home, feel free to contact me at (601) 421-7094 or emaildnelson@rightsizerealty.com.

Castro, T. (December 15, 2018). Market Value Vs. Appraiser Value. SFGate. Retrieved from: https://homeguides.sfgate.com/market-value-vs-appraised-value-1206.html

Pogol, G. (February 27, 2019). My House Appraisal Cam in Too Low. What Now? The Mortgage Reports Contributor. Retrieved from: https://themortgagereports.com/12508/my-home-appraised-too-low-appraisa