What Does a Home's "Market Value" Mean?

If you've recently purchased a home or are in the process of buying or selling a home, you may have heard the words "market value" and "market price" from your real estate agent. But what do they mean, and how do they impact the selling and/or buying of property?  

What Does “Market Value” Mean?  

Market value is a professional opinion of what a house would sell for, in its current condition, within a reasonable amount of time on the open market. For most real estate markets, we can call “a reasonable amount of time” between 30-90 days, though it can vary.  

Expert Tip

Market value represents an objective assessment based on comparable sales, current market trends, and the property's specific characteristics.

What Does “Market Price” Mean?  

Conversely, market price is what someone is actually willing to pay for a property, based on the property’s features, location, and perceived value. Unlike market value, this number reflects real-world buyer behavior and can be influenced by things like emotions, urgency, and individual circumstances. 

The market price might be higher or lower than the market value depending on things like buyer competition, seller motivation, or unique property features that appeal to specific buyers. 

How Do Market Value and Market Price Impact Each Other? 

As you might imagine, the relationship between market value and market price is important for both buyers and sellers to understand: 

For Sellers: Knowing the property’s market value helps you list the home at a price that's fair for the current housing market, yet competitive enough to either pay off an existing mortgage or make a profit. 

For Buyers: You need to know the market value so that your offers are in line with what the house is actually worth. If you're getting financing from a financial institution to buy the house, the appraised value determines how much you're able to borrow. 

Seems pretty simple, right? You find out the value, and then you price it accordingly if you're selling or make an offer if you're buying. 

Ah, but then there's supply and demand. Remember that little phrase from school?  

Understanding “Buyer's Market” vs. “Seller's Market” 

Supply and demand dynamics help determine if the current housing market is a buyer's market or a seller's market – and this classification significantly impacts both market value and market price. 

Buyer's Market Characteristics 

A buyer's market indicates that there are more houses available than there are buyers. In this scenario: 

• Sellers compete with one another to get their homes sold quicker 

• Sellers may make improvements to their homes, offer to cover closing costs, or lower their listing prices 

• Market prices often align closely with or fall below market value 

• Buyers have more negotiating power 

• Properties may take longer to sell 

Seller's Market Characteristics 

A seller's market is the reverse – there are more buyers than houses available: 

• Those who have a house for sale get to reap the benefits of multiple offers, higher offers, and faster sales 

• Market prices often exceed market value due to competition 

• Buyers may need to offer above asking price to secure a home 

• Properties sell quickly, sometimes in days rather than weeks 

How is Market Value Determined? 

So, with all this talk about supply and demand, how do you figure out the true market value of a piece of property? Is it just an educated guess? Can you do anything to change it? 

If you're selling, you could start by checking out comparable properties in your area on popular real estate websites to get an idea of what homes are selling for. Keep in mind, though, that homes in different locations will sell for different prices, even just a few blocks away. 

However, several factors can impact a home's value, so you need to take into consideration: 

• Proximity to shopping centers and amenities 

• Access to public transportation 

• Nearby parks and recreational facilities 

• School district quality and ratings 

• Neighborhood safety and crime rates 

• Recent infrastructure improvements or developments 

Professional Real Estate Appraisal 

To put all of the guesswork to rest, you need to find a professional real estate appraiser. These are licensed professionals who make it their career to assess homes and take into consideration all of the factors mentioned above. 

You'll have the appraisal report on paper for your real estate agent if you're listing your home. If you're buying and getting financing, your lender will require an appraisal to make sure the property is worth at least the amount you are requesting to borrow.  

Expert Tip

It also helps them determine if there's a need for private mortgage insurance (PMI), depending on your down payment amount.

What to Do if You Disagree with an Appraisal 

If you're buying and disagree with the assessment, contact your lender immediately to find out what steps you can take to request a second appraisal or provide additional comparable sales data. 

If you're selling, you can dispute the value with your appraiser and provide them with your own comparative analysis or even commission another appraisal if one was previously done. Keep in mind, this may or may not change the final appraised value. 

If you believe your appraiser didn't complete the appraisal correctly or missed important factors, you can contact the state agency that oversees real estate appraisers in your area to file a formal complaint. 

Factors That Can Increase Your Home's Market Value 

While no one can control overall market conditions, there are a few improvements you can make to potentially increase your property's market value: 

• Kitchen and bathroom renovations – These typically offer strong returns on investment 

• Curb appeal improvements – Landscaping, exterior painting, and maintenance 

• Energy efficiency upgrades – New windows, insulation, HVAC systems 

• Additional living space – Finished basements, room additions, or converted spaces 

• Smart home technology – Modern buyers increasingly value connected home features 

Ready to Buy or Sell? Get the Best Guidance 

Understanding market value versus market price is just the beginning of a successful real estate transaction. And at Atlantic Bay, our experienced Mortgage Bankers can help you traverse the financing aspects of your home purchase and ensure you understand how appraisals and market values impact your mortgage approval. 

If you have any questions about how market value impacts your home purchase or refinancing options, contact our team today!