There are many terms that can be used to value a property. They include appraised value, market price, and price per sq foot.
But, it is not always clear what these terms actually mean or how they relate to one another. This blog will help to dispel some of the myths that surround these terms and clarify their true meanings.
Myth #1 – Appraised Value Is the Same As Market Value
A common misconception is that market value and appraised valuation are synonymous. These terms are often confused, but they can be used in different ways. The appraiser will assign a value to a property.
An appraiser uses a number of methods to determine the value a property. These include the sales comparison approach and cost approach. Lenders often use the appraised valuation to determine how much they’re willing to lend on the property.
On the other hand, market value refers to the selling price of a property on the open marketplace. This value is determined primarily by supply and demand and can fluctuate depending on many factors like the economy, property location and property condition. Agents often use the market value to determine the price of a property.
Myth #2 – Price per Square Foot is the best indicator of a property’s value
Another common myth is that the best indicator of property value is price per square foot. Price per square foot is a useful indicator, but it should not be used as the sole indicator. Prices per square foot vary widely depending upon factors like the property’s location, the type of property and the condition of it.
A luxury condo in a central location might have a higher price per square footage than a home in a suburban neighborhood. The same goes for properties that have been recently renovated. A property in dire need of repairs may command a higher price per sq foot.
Myth #3 – The Market Value or Appraised Value is Always Correct
Important to note that the appraised and market values of property are not always accurate. Although appraisers can use many methods to estimate the value of a property’s property, the estimates may be influenced by factors such the availability and condition of comparable properties. Market value can also be affected depending on factors such as demand for property in the area or the state of economy.
Also, appraised and market values are not the same thing as the price a buyer will pay for a property. A buyer could be willing or unable to pay the appraised value or market price depending on their circumstances and motivations.
Although they are useful in determining the value of a property’s property, they should not be considered as the sole indicator. It is important to consider other factors like the type, location, and condition of the property when determining its true worth.
Also, these values do not always reflect the price a buyer would pay to purchase a property. All of these factors will help buyers, sellers, lenders, and others make informed decisions about a property’s worth.