Home Appraised Value vs. Market Value: What’s the Difference and Why It Matters

When it’s time to sell your home, one of the most important (and often misunderstood) aspects of the process is how your home is valued. Two terms you’ll hear a lot are appraised value and market value. While they sound similar, they serve very different purposes.

Put simply, appraised value is what a lender thinks your home is worth, while market value is what a buyer is actually willing to pay. 

What Is a Home’s Appraised Value?

The appraised value of your home is a professional estimate of its worth, typically conducted during the mortgage process. When a buyer finances their purchase, their lender will require an appraisal to ensure the home’s value supports the loan amount.

Who Calculates It?

A licensed appraiser hired by the buyer’s lender performs the appraisal. They’re an independent third party with no stake in the sale price. Their job is to provide an unbiased opinion of the home's value based on a standardized process.

What Affects Appraised Value?

Appraisers use a combination of on-site inspections and market data to determine a value lenders can rely on. Several factors go into an appraisal, including:

• Size and condition of the home
• Recent comparable sales (often called "comps") in your area
• Location and nearby amenities
• Market trends — though appraisals tend to focus more on past sales than current demand
  

When Does It Matter?

Appraised value becomes critical once an offer is accepted and the buyer begins the loan process. If the appraisal comes in lower than the agreed-upon purchase price, it can delay or derail the deal, so sellers must understand how it works before listing.

What Is a Home’s Market Value?

While the appraised value is based on a formula and professional assessment, the market value of your home is determined by one simple thing: what a buyer is willing to pay for it.

In other words, it’s what your home would sell for in today’s open market, based on current conditions, buyer demand, and what similar homes are selling for nearby.

Who Determines Market Value?

Unlike appraised value, market value is set by the market itself — a combination of buyer behavior, seller strategy, and local real estate conditions. A real estate agent plays a key role in helping you understand and price your home based on this dynamic.

What Affects Market Value?

Market value is influenced by a broader range of factors, including:

• Buyer demand (Are more people looking to buy than sell?)
• Inventory levels and competition
• Neighborhood reputation and amenities
• Seasonality and timing of your listing

Even small details (ex., updated finishes, curb appeal, staging, etc.) can sway buyer perception and drive up market value.

When Does It Matter?

From the moment you list your home, market value is what shapes buyer interest, showings, and offers. It directly affects how quickly your home sells and how much you ultimately walk away with.

Appraised Value vs. Market Value: Key Differences

Although both values aim to answer the question, “What is this home worth?”, they often arrive at different numbers — and serve very different purposes. As a seller, understanding how they compare can help you price strategically and avoid bumps during the selling process.

Here’s a quick breakdown:

Here’s a real-life example: 

Let’s say your home is appraised at $350,000. However, you receive multiple offers, and a motivated buyer is willing to pay $375,000. That $25,000 difference represents market value rising above appraised value — a common occurrence in a competitive market.

Why Understanding Both Values Matters for Sellers

If you’re preparing to sell your home, knowing the difference between appraised value vs. market value isn’t just a technical detail; it can directly impact your strategy, sale price, and transaction smoothness.

Here’s why it matters:

• Helps You Set a Smarter List Price
  Understanding both values can help you price your home competitively — not too low that you leave money on the table, and not so high that buyers are scared off (or the appraisal becomes a hurdle later).
  
  
• Prepares You for the Buyer’s Financing Stage
  Even if a buyer agrees to your asking price, their lender will still require an appraisal. If the appraised value comes in lower, you may need to renegotiate.
  
  
• Prevents Surprises During the Transaction
  Knowing how appraisers think (and what they look at) helps you anticipate potential issues and avoid deals falling apart due to financing problems.
  
  
• Informs Pre-Listing Decisions
  Some sellers choose to get a pre-listing appraisal or lean on their agent’s comparative market analysis (CMA) to get a realistic picture of their home’s value before hitting the market.

In short, understanding both values gives you more control, fewer surprises, and a better chance of getting the results you want from your sale.

What Happens If the Appraisal Comes in Low?

A low appraisal is one of the most common hiccups sellers face, especially in a hot market where buyers may offer over asking. If the appraised value is below the agreed-upon purchase price, it can throw a wrench into the sale.

Here’s what can happen:

1. The Buyer Renegotiates the Purchase Price

Most lenders will only finance up to the appraised value, which means the buyer may ask you to lower the price to match the appraisal. As the seller, you can agree, counter, or walk away — depending on your priorities and how much flexibility you have.

2. The Buyer Brings More Cash

If the buyer really wants the home, they may cover the difference in cash to make up the shortfall. This is common in competitive markets or if the buyer has strong financials.

3. You Dispute the Appraisal

You and your agent can challenge the appraisal by providing additional comparable sales or correcting any errors the appraiser may have made. While not always successful, it can be worth trying — especially if the valuation seems off.

4. The Deal Falls Through

In some cases, if no agreement is reached, the buyer may back out of the deal (especially if they included an appraisal contingency in their offer). This is why it’s important to anticipate appraisal risks when setting your price.

Tips for Sellers Facing a Low Appraisal:

• Price your home realistically from the start, based on local comps
• Work with an experienced agent who can advocate for your home’s value
• Keep records of recent upgrades or improvements to share with the appraiser
• Be prepared with a backup plan if negotiations don’t go as expected

Work With a Local Agent Who Understands the Market

Whether you're just starting to think about selling or prepping your home for the market, understanding the difference between appraised and market value is key to a successful sale. 

Working with a knowledgeable local agent can make all the difference. A great agent will help you interpret both values, set a competitive price, and confidently navigate any appraisal-related challenges.

Ready to sell?

Contact the team at BlueWest Properties to price your home with clarity and strategy and make your next move smooth.