Appraised Value: Definition, Importance, Vs. Market Value

About Appraised Value:

An appraised value is an evaluation of a property’s value based on a given point in time. The evaluation is performed by a professional appraiser during the mortgage origination process. The appraiser is usually chosen by the lender but the appraisal is paid for by the borrower.

The appraised value may not correspond to an asset’s or property’s market value.

Understanding Appraised Values:

The appraised value of a home is an important factor in the loan underwriting process and plays a role in determining how much money may be borrowed and under what terms. For example, the loan-to-value (LTV) ratio is based on the appraised value.

In general, if the LTV is greater than 80%, the lender will require the borrower to buy private mortgage insurance. If the LTV drops to 78% upon a new appraisal, private mortgage insurance payments may be eliminated.

The appraised value may or may not correspond to the actual market value, or selling price of a home or other asset. Indeed, a home may sell for above appraised value if there is a bidding war or the real estate market in an area is hot.


  • The appraised value is a professional judgment of a property’s worth, which may not correspond to its actual market value or selling price.
  • Lenders rely on appraised values to underwrite mortgage terms such as computing loan-to-value (LTV).
  • Sellers of homes may seek to increase the appraised value through capital improvements and renovations, curb appeal, and basic repairs.

The Role Appraised Value Takes in Real Estate:

The appraised value of a property can differ from the market value and even an agreed-upon purchase price for a home. The market value for a property is the price that buyers are willing to pay to purchase real estate. For example, a buyer might offer $225,000 for a home that the seller marketed at $240,000. This could lead to negotiations between the seller and buyers with a potential compromise price somewhere in between.

Those price levels could still differ from the appraised value that the lender will use to determine how much financing will be authorized toward the purchase.

Improving Appraised Value:

Property owners might seek to improve the appraised value of real estate by making improvements that go beyond general upkeep and basic repairs. For example, a homeowner might add a deck or patio to the property to increase the recreation options. Heating and ventilation could be improved with more energy-efficient equipment. Smart controls can be installed that allow appliances, lighting, and security systems throughout the home to be operated remotely and automatically. The garage could be expanded to accommodate more vehicles. Bathrooms might be upgraded with new showers or tubs. Kitchens could be renovated with new ovens, increased counter space, and a garbage disposal system. Permanent upgrades that improve the enjoyment and use of the property can also increase the appraised value. 

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