Appraisal vs. Market Value

Monday June 28, 2021

With the market in full swing and showing no signs of slowing down, we have received a number of calls over the last few months from prospective sellers asking us to give them an idea as to the worth of their home.  The “market analysis” we perform is an estimate of market value based on recent sales of similar homes in the area.  We are often asked how this differs from a town assessment or a mortgage appraisal.  Often sellers will reference a recent mortgage appraisal or town assessment that gives a different value of their home.  The common question to a REALTOR® is then “why is your value of my home different?” 

In the simplest of terms, a home’s “market value” is based on the amount of money the market, i.e. a buyer is willing to pay for property.  Simply put the value is what a buyer and seller will agree on for a price.  The “appraised” value is the value of the property determined by a bank or mortgage company. 

Sometimes, especially in an active sellers’ market like the one we are in now, the value of a home will be even higher than the appraised value or what your REALTOR® has determined as the “market value”.  Here are the major differences between what an appraised value and market value:

Appraised Value:

An appraisal is an estimate of market value. An appraiser can use many methods for coming up with this estimate.   An appraiser is a professional hired by the bank or mortgage company who can tell you what your home is worth but not necessarily what it will sell for.  Tricky I know, but bear with me.  The appraiser will come to your house and list the number and size of the rooms and any extras, such as a hardwood floors, granite countertops and finished basements or attics.  The appraiser will compare your home and property to other homes that have sold recently with similar features. 

The main way that it differs from a REALTOR® Market Analysis is that an appraiser is hired by a bank or mortgage company to make sure that the buyer is purchasing a property that is worth at least the value of their loan.  Appraisers usually use “comparable sales” when evaluating the market value of a home.  In an appraisal that is done by a bank for a buyer who has the home under agreement, the appraisal certifies to the bank and secondary mortgage investors that the buyer is paying fair or less than fair market value for a home.

Appraisers look at nearby properties with similar characteristics which have sold in the past 6 months to see at what price they sold and they typically give the most weight to the property they feel is most like the property being appraised.

Comparative Market Analysis (CMA)

A CMA is done by REALTORS® to establish the most likely selling price for a property. To do this they look at the most recent sales of homes similar to yours in your community.  Ideally your neighbor’s home is the exact same style as yours and sold yesterday.  Since this is rarely the case, they compare it to homes with the same number of bedrooms, living area, land, number of bathrooms, etc.  These sales should be within the last year and a good sampling is typically more than 3.  If you can’t find more than 3 in the same town, then looking in the surrounding towns is preferable.  A REALTOR® that works and has success in your area can give you a good idea as to what your home will be worth on the open market.  They may know of homes that sold privately or of good or bad quirks, (flooded basement, seller was transferred out of town and had to move immediately) not mentioned in MLS, etc.

Appraised value does not always equal the true market value or more specifically what the home will sell for on the open market.  Talk with a REALTOR® who knows the area well and has a history of success in real estate sales in your area.

If you have any questions about this article,  real estate in general, or are looking to buy or sell a home please contact me, John McCarthy at Rowley Realty, 165 Main St., Rowley, MA 01969, Phone: 978 948-2758, Cell 978 835-2573 or via email at

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