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Appraised Value Vs. Market Value in Real Estate

Crighton Properties  |  July 04, 2024

Appraised Value Vs. Market Value in Real Estate

Knowing the real price (value) is crucial before listing any property or home for sale. Property owners want to sell for as much money as possible, but asking for too much will scare off potential buyers, so setting a realistic price is necessary for both buyer and seller.

If you're considering selling or applying for a home loan, you must know your property's appraised and market value. These two terms will help you determine your home's worth.

If you're not aware of the differences between them, no worries! We will help you understand them and help you find the right price for Cayman Islands homes for sale.

What is an Appraised Value?

An appraised value is a property price determined by a licensed appraiser for any objective. Banks or private lenders usually order appraisals before approving a buyer’s loan to reduce risk because they only provide loans or credit on the property's appraised value.

In the case of property selling, if the home appraisal is lower than the seller's offer, the buyer and seller might negotiate to keep the deal from falling apart. Otherwise, the buyer might back out, and the seller would need to put the house again on the market, delaying the sale. There are several factors appraisers look at to calculate a home's appraised value.

The most common external factors included by the appraiser are:

Price of similar listings
Market trends
Price of comparable properties in the area
Curb appeal

Important internal factors that affect appraised value:

Amenities (like pools, spas, etc.)
Construction quality and structural integrity
Number of bedrooms and bathrooms
Code Compliance
Interior design
Age and current condition
Recent renovation

Some of the above-mentioned factors, like location, similar property prices, and market trends, are out of your control. However, other factors, like the interior condition and curb appeal, can be improved with pre-listing home improvements.

What is Market Value?

Unlike an appraisal, market value is the price a property can sell for on the housing market. It's determined by what a buyer is willing to pay or at what price the owner is willing to sell. Supply and demand heavily influence this value because they affect what buyers are willing and able to pay.

A Cayman Islands real estate professional doesn’t set the market value (though they do run comparisons to estimate it). Don't be surprised if the market value doesn't match the appraised or assessed value — buyers and appraisers look at different things when deciding a property's worth.

Factors that influence the market value of your property

Market value can change a lot, especially during times of market shifts or when sellers worry about falling house prices. Here are some factors that affect a home's market value:

Home space and lot size
Property condition
Recent renovation work
Local market trends
Economic trends
Price of similar properties in the nearby areas
Interior and Amenities (like pools, spas, etc.)

These factors are similar to those considered by appraisers, but local and economic trends have a bigger impact on market value. So, you may have observed that property prices fall in economic instability or crises.

For example, rising interest rates can lower market value because fewer buyers are looking to buy. On the other hand, low interest rates can increase prices — more buyers can lead to bidding wars, pushing market values above appraised values.

At the Bottom Line

Evaluating appraised and market values is critical for determining the appropriate price for your property. Pricing your home correctly assures an easier sale process and increases your return. If you're ready to sell or want more information, contact a Cayman Islands real estate company today to determine the best price for your home!

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