What's the difference between appraised and market value?
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In a previous video, we described why real estate agents tend to price homes a little under market value—they’re not giving the comparable sales the time adjustment needed. Due to federal regulations from Freddie Mac and Fannie Mae, appraisers can’t go back and add the same time value that we discussed Realtors adding. More importantly, the appraisers are going to give your home the appreciation and value from the date they did the appraisal.
That means if you have a six- to eight-week period between when the appraiser came and the closing date, that appraiser might be missing 5% to 8% of additional appreciation. On a $400,000 house, that could be between $20,000 and $25,000!
“The market value of a home is between the most a buyer is willing to pay and the lowest that a seller is willing to accept.”
The question becomes, “Who is entitled to that equity from the date the appraisal was done to the closing date?” In my opinion, the sellers are entitled to it since they continue to own the property. That is why most offers accepted today are from buyers who are willing to bring in additional funds in case the house doesn’t appraise. The appraiser’s hands are semi-tied when the market is appreciating as quickly as ours is.
The bottom line is don’t think that the appraised value is the same as the market value. By definition, the market value of a home is between the most a buyer is willing to pay and the lowest that a seller is willing to accept. Additionally, don’t be overly concerned about appraisals; if you work with a great agent like the ones we have in the Tampa Home Group, we can answer all these questions for you before you go under contract, explain what market value is, and make sure that you’re completely educated before you buy.
If you have any questions, don’t hesitate to reach out to us. We’d love to help you.