Different Types of Value (Market, Assessed, and Appraised Value)
In the realm of real estate appraisal, three pivotal types of value come to the fore: market, assessed, and appraised value.
Market value, also known as fair market value or open market value, is defined by what a property might reasonably be sold for under normal circumstances. This value is often shaped by supply and demand forces in the real estate market, where comparable properties and their sale prices play a significant role.
Assessed value, typically established by local government for property tax purposes, is a percentage of the property’s fair market value. The specific proportion (assessment ratio) can vary – not only between different locations, but also between different types of property within the same location.
Appraised value, on the other hand, is a professional appraiser’s opinion of a property’s monetary worth at a specific point in time, following a detailed inspection. Lenders often use this value to determine the amount of money they are willing to loan a borrower to purchase that property. Unlike market and assessed values, the appraised value is not influenced by the property’s sale price or tax implications. It’s based solely on the property’s condition and the values of similar properties (comps).
Each of these values offers a different perspective and employs different strategies for calculation. Collectively, they contribute to a comprehensive understanding of a property’s financial portrait.
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