“Market value” is the probable price a property should bring in a competitive, open market under conditions requisite to a fair sale. Essentially, this is a pre-negotiation opinion of what a house should bring in its local market — i.e., its geographical area, generally an area such as a suburb or neighborhood. In other words, in what range do similarly situated houses in the area/neighborhood sell for? “Appraisal value” is an evaluation of a property’s worth at a given point in time that’s performed by a professional appraiser. Appraised value is an important factor in loan underwriting and determines how much money could be borrowed, and under what terms. For example, the Loan to Value (LTV) ratio is based on the appraised value. Where LTV is greater than 80%, the lender generally will require the borrower to buy mortgage insurance. “Assessed value” is the amount local or state government has designated for specific property and frequently differs from market value or appraisal value. This assessed value is used as the basis of property tax and when a property tax is levied. The assessed value of real property isn’t necessarily equal to the property’s market value. Approximately 60% of U.S. properties are assessed higher than their current value; however, this doesn’t reflect what the homes will sell for. WHAT IS YOUR HOME WORTH? The first step in selling your home is knowing the difference between value, worth, and price. Let’s examine the determining factors at work. Understanding those factors allows them to be leveraged. There are several ways a home’s value is derived.
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