You may be wondering what your home's appraised value is vs. its market value and how both might impact a home's purchase or fair market value.

The appraisal value and assessed value can differ considerably from the same piece of real estate market value in practice. A specific real estate professional could have assigned this appraised value to the home at a specific point in time, causing the price to vary significantly. On the other hand, economic conditions and more significant market forces determine the home's market variables.

Over time, the property's appraised value can change significantly with the market conditions. Many factors help provide fair market value and are based on the local market and economic conditions, plus the age and state of the home.

We have provided some in-depth details below to learn more about how fair market value and appraised value work. Additionally, we created a handy guide for you to understand these basic real property principles if you are interested in how professionals define them.

Appraisal Value vs. Fair Market Value

A professional real estate appraiser is the one who assigns an appraised value to your house. In most cases, the home's market value is in the hand of buyers, as they value real estate holdings based on what they are willing to pay for it and what they think the market values should be.

What Is Appraised Value?

In its quest to ultimately determine how much money your home is worth, the real estate industry takes two relative measures: the holdings appraisal and the home assessment.

A professional appraiser is a person who is a state-licensed real estate professional and can help you determine your home's market appraised value. If you hope to obtain a home loan, you may find most financial institutions you deal with (credit union, bank, etc.) typically work with appraisers.

In other words, an appraisal is a home's valuation that helps to determine recent sale prices based on the other deciding factors and properties in your area. Estimates (which can affect the amount of mortgage you can obtain and a home's ultimate sales price) are performed to safeguard, ensuring lenders don't pay-out too much during the home loan process for more than the house is worth.

It is imperative to note that, at the same time, it is typically the buyer's requirement to pay for appraisal assessment as part of getting the house for the asking price during the home buying process. Under a standard mortgage lending scenario, the buyer goes to the lender to obtain a mortgage. The selected lender is required to ask a licensed professional to consider all interior and exterior home details that can help them arrive at a home appraisal value.

A good general rule of thumb is to remember that appraisals are based on more complex findings than tax assessments. On the other hand, a home's assessed value is a comparative measure of its value used to determine the amount of property taxes that the government might impose on the building. It is a due diligence process that is a fundamental part of the mortgage underwriting.

Bank Appraisal

In essence, just because you need a professional home appraisal and know the meaning of home appraisal market values doesn't necessarily mean you are ready to proceed with the process.

An appraisal conducted by financial lenders is known as a bank appraisal, and note that it must not lend any more money to you than what the home value is (this is based on the appraised value that the lender has arrived at). Please keep in mind that if your review comes in below the mortgage you have applied for, it is common to seek a second opinion if you are concerned that the first homes appraisers' findings are below market value.

Tax Appraisal

If a government taxes assessor has assigned a value to your house, it is a tax assessment. Local governments, towns, states, cities, and municipalities employ these government tax assessors to review property information that has determined its assessed value. Various factors come into play when determining the assessed value, such as comparative market analysis, historical property data, annual property taxes, and home inspection findings. These are all considered as it works to arrive at a property's assessed value.

An assessed value assists a county, an insurance company, and local governments in determining how much property tax the owner of the home must pay. Money collected as property taxes is used to pay for civic benefits, public works, other public services to help the curb appeal of local crime rates.

For the sake of clarity, please be advised: The tax appraised value is determined by the count assessor valuation (performed using a different methodology), which means having a home assessment conducted is not going to raise your property tax or listed price.

What Is Market Value?

The actual value of your property when placed on sale on the open market is known as market value. In essence, the amount buyers are willing to pay for purchasing the home is determined and defined by the current market prospects.

Regardless of the assessed value or appraised value, market value is the amount buyers are happy to pay for the home mortgage on the property's market. In other words, the government or local state might think your home is worth a certain amount, but the bank or buyer could still think it is less or more than the property assessed or appraised value.

Market Value Scenario

Various scenarios might come into play when purchasing a home and understanding appraised values. Here's an example:

Craig might want to sell his property for $300,000, but if prospective buyer Mike can only afford $260,000, he may put in an offer for that amount or somewhere in between the two prices (if it is a competitive market). However, a general rule of thumb is that the more competitive a market is, the higher market value you could expect to see on a home or property.

First-Time Home Buyer? Don't Sweat the Values

Understanding market value vs. appraised value is imperative when it comes to buying a home. After all, knowing both sums can help you move towards the final steps of making a reasonable offer on the home you have been keeping an eye on.

Favorite FAQs Answered

Why Do Market and Appraised Values Differ?

That is because the appraised value is what a professional appraiser thinks a property or piece of land is worth (their professional opinion) vs. the market value, which is the price the buying public is willing to pay for the property.

What Can You Do If These Valuations Are Different?

Seek many opinions as it can help you to get a broader view of the current market conditions. Two professional appraisers could develop entirely different valuations, and the prospect may have a completely different number in their head.

How Can You Assess Appraised Value Vs. Market Value?

While a value cannot be assigned to a home by yourself, you can provide your appraisal with relevant information and facts to support your suggestion that the property could be worth a specific amount.


The housing market is booming, and new homeowners are looking to purchase their first property at any time. Understanding how home appraisals work can help you make fair offers and get the most value for their money.

Choose to deal with a professional home appraiser when looking to purchase your first home, and you could get it for a fair and competitive price.

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!