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Appraisal value vs market value: What is the difference?
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Appraisal Value vs. Market Value: What is the Difference?


Whether you’re selling or buying an investment property, its appraisal value vs. market value is something you’re bound to wonder about. How appraisal value vs. market value might affect the potential sale or purchase of the property is also a concern for real estate investors

The appraisal value vs. market value are figures that can differ significantly. Understanding why it happens is something you need to understand if you’re serious about real estate investing. 

This handy guide will explain the basic real estate principles of appraisal value vs. market value.    

What is the Appraisal Value?

The appraisal value is an objective assessment of a property’s value based on the findings of an appraiser. The appraiser will base their valuation on things that cannot be easily changed, such as the location and size of the property.  

An appraiser is a state-licensed real estate professional and is typically engaged by a financial institution such as a bank or credit union if you need financing for your purchase. As such, the appraisal cab influence a home’s ultimate sale price and the amount of mortgage you’re able to obtain. They are also a safeguard for the lender because they help to ensure the loan is not more than the property is worth.

Someone has to pay the appraiser for their services, and it’s usually the home buyer’s responsibility as it’s considered a vital part of the home loan application process.

If the appraisal comes in lower than the offer, buyers and sellers have an opportunity to renegotiate the dealer. The buyer also has the option of walking away.    

What Factors Affect the Appraisal Value?

A few factors that can affect the appraisal value include:

  • Square footage of the property
  • Code compliance
  • Exterior/interior condition
  • Location of the property
  • Comparable listings of other homes in the area
  • Number of bedrooms and bathrooms
  • Age of the property

How appraisers approach the home inspection varies considerably, but unfortunately, the appraised value is not up for negotiation. 

Different types of market appraisal

There are several different types of market appraisal, depending on the purpose of the assessment.

Bank Appraisal

A bank appraisal is an appraisal conducted by your financial lender. How much you’re allowed to borrow is based on the appraised value that the lender has arrived at. The value is non-negotiable. However, if it comes in under that amount of mortgage you’ve applied for and you feel the appraiser’s findings are too low, you do have the option of looking for a second or even a third opinion. It’s not uncommon for two different appraisers to have two very different valuations, and a prospective buyer may have a completely different number altogether.  

Tax Appraisal

A tax appraisal is undertaken by a government tax assessor who has been assigned to your property. This type of assessor is generally employed by a city, municipality, town, or other local government entity. Their job is to review property data and visit local homes to determine the assessed value of the property they’re looking at.

To arrive at an appraisal value, they’ll consider factors such as home inspection findings, historical property data, and comparative market analysis.

Local and county governments used the assessed value to determine how much property tax must be paid. Property tax is collected to help pay for public works, public services, and other civil benefits.

As a general rule of thumb, a bank appraisal is based on a more in-depth analysis than a tax assessment, as it is a fundamental part of the mortgage underwriting and due diligence process.  

How Can You Improve the Market Appraisal of an Income Property?

If you’re concerned about the appraisal value of your property, there are some things you can do to weigh the odds in your favor.

Make Minor Fixes

For many property owners, there’s a long list of minor repairs that need doing. It might have been your intention to get round to them, but you might not have had the free time. If you’ve got one of those lists, now is the time to take care of them before your appraisal.

Refreshing any chipped paint or fixing a dripping faucet won’t necessarily add value to the property, but they may help improve the appraiser’s impression of the property’s condition.

Spruce up the Outside

Don’t forget to pay attention to the outside of your property at the same time. For example, it might help if the lawn is freshly mowed, any hedges have been trimmed, and the gutters are cleaned out for the appraisal day. 

Gather Your Paperwork

Once you’ve taken care of any repairs and smartened up the exterior, it’s time to gather any paperwork you think the appraiser might need. Of course, each appraiser is likely going to ask for something different. However, typical requirements include a floor plan that outlines the property’s square footage, a plot of land survey to show the acreage, or a list of any recent improvements you’ve made together with the cost.

Ask Your Real Estate Agent for Comparables

The baseline for a property’s value is comparable sales. It’s essential that you use appropriate properties for comparisons, and your real estate agent should be able to help. Ask them to provide some comparables for the appraiser. They’re not obliged to use them in making their determination, but it’s not going to hurt to provide such information. 

What is the market value?

The market value of a property is determined by how much prospective buyers are willing to pay for it in the current market. It’s usually the same as the proposed purchase price when a buyer submits an offer on the home.

Whether you’re a buyer or seller, the market value is something you need to look for in a property listing. The Mashvisor Property Marketplace, for example, is somewhere investors can find off-market properties. Likewise, sellers can list their properties on the platform.

What Factors Affect the Market Value?

  • The asking price: The property’s asking price is a starting point for negotiations. From there, they decide to offer a contract price that might be lower or higher, based on their impression of the property.
  • The competition: by the time a prospective buyer is ready to submit an offer, they will have had several showings. They will have seen other houses on the market, many of which will be similar to the property they’re submitting an offer on. The buyer will weigh up how the property stacks up against others when they make an offer.
  • The property’s condition: the condition is a significant factor in determining the proposed selling price. When they look at a property, they’ll be thinking about whether they need to put money into the property after buying it. So a property that needs lots of TLC will likely get a lower proposed purchase price than a more up-to-date one.
  • The interest in the property: buyers also take into account any perceived interest of others when making an offer. For example, if a property has been sitting on the market for a while, it’s more likely to receive a purchase price that’s lower than one that has multiple offers.

There are various tools you can use to determine some of these factors. For example, the Mashvisor Property Finder helps real estate investors find top-performing properties for sale in their market of choice. Alternatively, you can use the Real Estate Heatmap to conduct neighborhood analysis and zero in on profitable areas to invest in. 

To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.

Appraisal Value vs. Market Value: Why do They Differ?

When it comes to appraisal value vs. market value, the two values are often different. The simple reason is that various factors determine the appraisal value vs. market value. A property’s market valuation is also more subjective than the appraisal because it’s based, on the whole, on the buyer’s opinion of the property.

Regarding appraisal vs. valuation, one doesn’t necessarily outweigh the other. The appraised value is important when a buyer wants to get approved for their mortgage. It should meet or exceed the market value.

On the other hand, the market value is equally important to the seller. It tells them how much money they can expect to earn from the sale of their home in today’s market.   

Tips on Improving the Market Value of Your Income Property

The market value of a property is very subjective, which means there’s not much you can do to guarantee you receive a particular price point. Even so, there’s no reason why you shouldn’t put your best foot forward, as there are things you can do to help encourage higher offers.

Depersonalize the Property

When you’re showing a property to prospective buyers, the goal is to encourage them to picture themselves living in the property. However, if there are loads of personal items throughout the property, this can be very distracting for the buyers. In view of this, take some time to remove all personal items, including photographs, religious items, and decor pieces that advertise a strong personal taste.

Stage the Property

You might want to take things one step further by staging the property. According to a 2019 Profile of Home Staging by the National Association of Realtors, 39% of real estate agents consider staging as a way of getting higher dollar value for a property. In addition, 53% also felt that staging reduced a property’s time on the market.

Let’s share some property staging tips:

  • Clean: a clean property shows potential buyers that you’ve taken good care of the property
  • Declutter: clutter distracts buyers from property features and can make it feel like there is less space. Box up the clutter and put it into storage. 
  • Freshen up: a few potted plants can do wonders to make a property feel fresh and inviting.
  • Odors: there are many things that can make a property smell uninviting. A damp bathroom, pets, kids, last night’s dinner aren’t very appealing. Instead, give the property an inviting aroma, such as cookies baking in the oven.
  • Define the rooms: make sure each room has a single, defined purpose, and it will help buyers see how to maximize the home’s square footage,
  • Decoration: wallpaper and paint are a personal choice, and it’s likely any potential buyer isn’t going to like what you’ve chosen. Tear down the wallpaper and paint the walls with a neutral color instead.
  • Flooring: if the flooring is dirty and stained, it’s not going to be very appealing. Similarly, linoleum is very outdated and looks cheap. If your budget allows, consider investing in hardwood flooring as it adds value and elegance to a property.
  • Lighting: take advantage of natural light by opening the curtains and blinds when showing the property. Add fixtures where necessary and turn on all the lights for showings.
  • Furniture: items of furniture should be the right size for the room and not make it appear too cluttered.
  • Walls and ceilings: cracks may indicate to the buyer there are problems with the foundations. Check whether there are issues with the foundations and either get them fixed or alert potential buyers to them.
  • Exterior: curb appeal is an essential factor and one that can heavily impact a buyer’s first impression. 

Make Sure the Property is Tidy

This might seem like a straightforward fix, but you’ll be surprised what a difference it makes. A quick tidy-up before a showing shouldn’t take too long. Dishes in the sink and unmade beds could affect a buyer’s opinion of the property. 

Final Thoughts

When it comes to appraisal value vs. market value, both metrics play an important role in real estate sales. If you’re the seller, you can use both values to ensure your property garners the highest value possible.

Understanding appraisal value vs. market value is equally important if you’re looking for a real estate property to purchase. Knowing both sums as you move forward and make your offer on a property you’ve had your eye on is critical.

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Dawn Cowles

Dawn is a content writer at Mashvisor but that's not the only string to her bow. She is also a real estate investor who has benefited from the advice and tips Mashvisor regularly shares. Dawn's content writing experience includes personal finance, sustainability, affiliate marketing, and senior care. When she's not tapping away at her computer keys writing, she spends her free time growing organic fruit and vegetables and walking her three dogs.

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