Appraised Value vs. Market Value: Understanding the Differences


Navigating the world of real estate can often feel like traversing a labyrinth, especially when confronted with terms like 'appraised value' and 'market value.' However, understanding these concepts is key to making savvy decisions, whether you're a first-time homebuyer, an experienced property investor, or a homeowner looking to sell. We're going to demystify these two critical terms, delve into their differences, and explore how they are calculated. We'll also provide actionable tips and insights on leveraging these values to your advantage in the St. Louis real estate market.

Understanding Value Concepts

Understanding the value of real estate is a critical part of buying, selling, or investing in properties. It allows you to make informed decisions and ensures you’re not overpaying or undervaluing a property.

The appraised value of a real estate property is the estimated worth given by a professional appraiser. This value is based on the property's physical condition, its location, and the recent sale prices of similar properties in the area. It is often used by lenders to determine the amount they're willing to loan on a property.

On the other hand, the market value is what a willing buyer would pay to a seller for the property in the current market. It's more subjective, as it depends on how much a buyer perceives the property is worth based on various factors like current market trends, property condition, and location. Understanding both these values can help you make savvy real estate decisions.

The Appraised Value

An appraised value is the estimated worth of a property determined by a certified appraiser. This value is typically calculated for mortgage lending purposes, where the lender requires an unbiased assessment of the property's worth before extending a loan. The appraisal provides a safety net for the lender, ensuring the property's worth covers the loan amount in case of a default.

To calculate the appraised value, the appraiser conducts a thorough inspection of the property. They evaluate various factors including the property's physical condition, size, location, and the value of comparable homes in the area. The appraiser also considers any improvements or renovations made to the property that could enhance its value.

Consider a real-world example: a homeowner in St. Louis has made significant improvements to their home, including a kitchen remodel and a finished basement. A professional appraiser inspects the property and compares it to similar homes in the area that recently sold. Taking into account the upgrades and the sales prices of comparable homes, the appraiser estimates the property's appraised value to be higher than the original purchase price. This value is then used by the lender to determine how much they can safely lend for a mortgage on the property.

The Market Value

The market value of a property is its estimated worth in the current marketplace, given a willing buyer and seller. It's a fluid concept that can change quite rapidly, influenced by various factors such as the economy, housing demand and supply, and the attractiveness of the location and the property itself.

To calculate the market value, real estate agents analyze comparable properties in the vicinity. This process is known as a Comparative Market Analysis (CMA), where the property under consideration is compared to similar properties that recently sold. Factors such as the number of bedrooms, bathrooms, square footage, and unique features are considered in the comparison.

Another critical factor in determining market value is the current real estate market trends. For instance, in a seller’s market where demand is high, and supply is low, a property’s market value can significantly exceed its appraised value.

Let's consider a real-world example: a three-bedroom house in a popular St. Louis neighborhood is listed for sale. The house was originally purchased a few years back for $290,000. However, due to a surge in buyer interest and limited housing supply in the area, the house ends up selling for $330,000. In this case, the market value of the house is $330,000, reflecting the amount a willing buyer paid in the current market conditions.

Comparing Appraised Value and Market Value

The comparison between appraised value and market value reveals some crucial differences, primarily in their calculation and application. Appraised value is a professional appraiser's impartial and unbiased estimate of the worth of a property based on its physical characteristics and comparable properties. In contrast, market value is based on the amount a willing buyer pays in current real estate conditions. This subjective figure can fluctuate depending on seasonal trends or changes in supply and demand.

These distinct values can significantly impact the buying or selling process. For instance, if the appraised value comes in lower than the agreed selling price, it may lead to difficulty securing a mortgage for the full amount.

In some situations, there can be a significant discrepancy between appraised value and market value. This divergence can occur for several reasons, including a rapidly changing market environment, unique property features not reflected in comparable properties, or differences in the subjective judgment of buyers and professional appraisers. Recognizing these differences can help buyers and sellers navigate real estate transactions more effectively and make informed decisions.

Utilizing Appraised Value and Market Value in Real Estate Transactions

Understanding and utilizing the concepts of appraised value and market value can significantly aid in making informed decisions for real estate transactions. For buyers, these values offer a guideline on what price to offer. Significantly, this understanding can help buyers negotiate better deals or even spot properties that are potentially undervalued.

For sellers, these values are equally crucial. The appraised value could serve as a base price, ensuring owners don't undersell their properties. Yet, understanding the market value is vital to set a competitive selling price, and attracting potential buyers without compromising on profit.

For property investors, these values are vital in making strategic investment decisions. The appraised value can provide a clear picture of a property's worth, while the market value can offer insight into its potential for profit or growth. By comprehensively understanding these values, investors can determine whether a property is a worthwhile investment, based on their financial goals and market predictions.


Many people often ask, "How can I calculate the appraised value of my property?" Don't worry you don't have to. A professional appraiser calculates the appraised value, considering factors such as the property's condition, location, and comparable homes sold in the area.

"How can I calculate the market value of my property?" Again, you don't to. Be very thorough explaining all custom details and updates you've made to your property, so that your agent can estimate the market value based on their knowledge of the current market conditions.

Another frequently asked question is, "Where can I find real estate sold prices?" Sold prices are often available in public records or can be provided by real estate agents. These prices are useful in determining both appraised value and market value.


Appraised value and market value are two important concepts in real estate transactions, requiring a deep understanding of their differences for successful buying or selling decisions. The Gellman Team, with our extensive experience and deep understanding of the St. Louis real estate market, is committed to helping you navigate these complexities.

Whether you're a first-time home buyer, an experienced property investor, or a homeowner looking to sell, The Gellman Team is your trusted partner in all aspects of real estate. We provide a comprehensive suite of services, from home valuation and pricing analysis to buyer's and seller's specialist services, all to ensure you achieve maximum value and satisfaction from your real estate transactions.

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