Market Value is an estimation. It’s the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale.
It assumes:
- Willing and knowledgeable buyers and sellers.
- An arm’s-length transaction (no undue influence).
- Reasonable exposure to the market.
Purpose:
- It aims to determine the underlying worth of a property.
- It provides an objective assessment based on market data and analysis.
Market Price is the actual amount a property sells for in a specific transaction. It can be influenced by various factors that may not reflect the true market value, such as:
- Urgent need to sell.
- A particularly motivated buyer.
- Unique circumstances of the transaction.
- Negotiation skills.
Variability:
- Market price can fluctuate significantly, even for similar properties in the same area.
Why They Differ.
Subjectivity vs. Objectivity:
- Market value is an appraiser’s opinion based on analysis.
- The market price is the result of a specific negotiation.
Market Conditions.
- Market value seeks to reflect typical market conditions.
- Market price can be affected by short-term or unusual market fluctuations.
Individual Circumstances.
- Market value disregards the unique circumstances of individual buyers or sellers.
- The market price directly reflects those circumstances.
In essence.
- Market value is what a property should be worth.
- The market price is what a property actually sold for.
Therefore, while market price can be an indicator of market value, it’s not always a perfect match. A well-conducted valuation aims to provide a reliable estimate of market value, even when market prices vary
