If you’re thinking about selling your home or curious about its worth, you’ve probably heard terms like “market value” and “appraised value” thrown around. While both are important, they mean very different things. Let’s break down what each one means, how they’re determined, and why understanding the difference is key to making informed decisions when selling your Calgary property.
What is Market Value?
Market value is the price a buyer is willing to pay for your home in the current real estate market. It’s influenced by various factors, including supply and demand, neighborhood trends, and how your home compares to similar properties in the area.
Essentially, it’s what someone is actually willing to pay for your property right now.
How Market Value is Determined:
Comparative Market Analysis (CMA): Your agent will look at recent sales of similar homes in your area.
Current Market Conditions: If it’s a “seller’s market” with high demand and low inventory, your home may sell for a premium.
Property Condition and Features: Upgrades, curb appeal, and unique features can impact how buyers perceive value.
Why It Matters:
Understanding market value helps you set a competitive asking price that attracts buyers without undervaluing your home. Setting the right price upfront is crucial because an overpriced property may sit on the market too long, while an underpriced home could leave money on the table.
What is Appraised Value?
Appraised value is the estimated worth of your home as determined by a licensed appraiser. This valuation is more formal and is often required by lenders to confirm the home’s value before approving a mortgage for the buyer.
An appraisal typically happens after an offer is accepted and before the sale closes. It’s based on a detailed inspection of your property, an analysis of comparable sales, and a professional judgment of your home’s overall quality.
How Appraised Value is Determined:
Home Inspection: An appraiser will evaluate the condition of your home, including structure, layout, and any visible defects.
Comparable Properties (Comps): Similar to market value, the appraiser will compare your home to recently sold properties in the neighborhood.
Objective Criteria: Factors like square footage, lot size, and the number of bedrooms/bathrooms are used to calculate value.
Why It Matters:
If the appraised value is lower than the agreed-upon sale price, the buyer’s lender might not approve the loan for the full amount, which can create a problem. Understanding your appraised value upfront helps avoid surprises later on.
Market Value vs. Appraised Value: Key Differences
Here’s a quick breakdown to make it simple:
Market Value:
What a buyer is willing to pay based on current market trends. It’s subjective and can fluctuate depending on demand and competition.
Appraised Value: An objective evaluation by a professional appraiser, primarily used for mortgage purposes. It’s more standardized but can sometimes differ from the market value.
Example:
Let’s say your home’s market value is $500,000 because buyers are willing to pay that amount in a hot Calgary market. However, the appraised value might come in at $475,000 based on an appraiser’s more conservative approach. This difference could impact your ability to close the sale if the buyer’s lender won’t cover the higher amount.
Which One Should You Focus On?
If you’re selling, market value is your primary concern because it dictates what buyers are willing to pay. However, it’s also wise to consider the appraised value to ensure your sale won’t hit a snag once the buyer’s lender gets involved.