November 18th, 2024 | Selling
What’s the Difference Between a Home’s Assessed Value and Market Value?
Do you ever wonder how much you would earn if you were to sell your house today? Since your home is such a significant part of your financial worth, it’s always worthwhile to assess your home’s value, whether you plan to move or not. Homeowners can use a wide range of tools to assess what their property might be worth in the current market. For example, you could visit a website (like ours) and have an experienced real estate agent come out and evaluate your home by comparing it to other listings or sales in your area.
Another option is to get a third-party appraisal, usually by arranging it with a bank. The real question is whether the amount the appraiser comes up with matches what the market will bear. It’s a critical distinction, especially if you plan to sell your home or borrow against its current value. In this post, we’ll talk about the difference between assessed value and market value, as well as what it might mean for your future plans.
Did you know that our highly skilled and experienced agents can provide you with a free home evaluation with no obligation? You can book yours right here.
Home Evaluation Vs Appraisal Vs Assessment
There are so many different ways to estimate the value of a property that it can be confusing for many homeowners. Our first step will be to simplify everything so you know what applies to your situation and when.
A home evaluation is when a real estate agent assesses your property to determine its approximate value. They’ll consider the square footage, the number of bedrooms and bathrooms, as well as any recent updates before coming up with an accurate estimate. Usually, this takes place before listing your home so you know how to set the price.
An appraisal is conducted by a certified appraiser, usually before a lender will approve a buyer’s mortgage after they’ve placed an offer on a home. A lender typically requires an appraisal before approving a mortgage, and most will not accept a home evaluation from a real estate agent as a substitute.
An assessment by MPAC (Municipal Property Assessment Corporation) is used to estimate how much property taxes will be due each year.
Market research is the first step to a successful sale or purchase in Ottawa. The posts below will help bring you up to speed:
- What Every Millennial Needs to Know About Ottawa Real Estate
- Does Real Estate Protect You Against Inflation?
- What are the Signs You’ve Found a Great Realtor®?
Market Value
At the end of the day, the results from a home evaluation, appraisal, or assessment don’t necessarily impact the market value. All that really matters is how much someone will – or will not – pay for your home. Let’s take a look at two scenarios you may face if you decide to sell. Imagine the assessed value of your home based on a home evaluation is $750,000.
- If there is a lot of demand from buyers, you could potentially receive multiple offers. Your listing could even trigger a bidding war, resulting in a price much higher than the assessed value.
- If the market is slow, you might need to lower your price to appeal to the few buyers who are serious about purchasing. This could mean selling for less than the assessed value.
The market value of your house is whatever it sells for. An appraisal or evaluation is simply an estimate. How accurate it will be depends greatly on the time lapse between the assessment and when your house goes on the market. For example, some sellers are often surprised at how much the market can fluctuate. An evaluation of $750,000 from just six months ago can be meaningless if demand changes.
Should you make the move to Canada’s Capital City? The posts below can help you decide:
What It Means When Buying or Selling a Home
If you’re not careful, the variance between the market value and appraised value can become an issue no matter what side of the transaction you are on. Earning way more than your asking price might be the ultimate goal if you’re the one selling. However, the lender can throw a wrench into the sale for you and the buyer if the sale amount comes in much higher than the bank says the property is worth.
If you accept a conditional offer and the buyer cannot get financing, your house goes back on the market, which can also disrupt your plans for your next steps. Receiving an offer over your asking price can be a cause for celebration, but only if your real estate agent is experienced and does their due diligence to ensure the buyer can follow through.
As a buyer, you must be even more in tune with how the appraisal can affect you. You might fall in love with a home and get caught up in an emotional bidding war. Just remember that the lender will not give you more than the appraised value. If you offer more than the asking price, you could be on your own to come up with the difference.
Lastly, you’ll want to be mindful of the assessed value so you’ll know how much you can expect to pay in property taxes each year. Your ongoing carrying costs are another consideration for your budget before finalizing your decision to buy a house.
Whether buying or selling, a local real estate agent can help you understand all of the nuances of the current market to protect your interests and help you get the best possible outcome.
Do you have questions about buying or selling Ottawa real estate? Our knowledgeable agents are committed to your success. Reach out today to 613.829.7484 or email mail@chellteam.com to get started.
