What does market value signify in real estate?

Market value in real estate refers to the price a property would sell for on the open market under normal conditions, commonly known as the “fair market value.” This valuation is based on what buyers are willing to pay and sellers are willing to accept, considering factors such as location, condition of the property, and prevailing market conditions.

This definition captures the essential concept that market value is determined by actual transactions in the marketplace rather than theoretical listings or appraisals alone. To arrive at an accurate market value, various data points about comparable sales, market trends, and property specifics are typically analyzed. This provides a realistic estimate of what a buyer should expect to pay and what a seller might receive in a competitive marketplace.

For instance, the highest price a property can be listed at does not necessarily reflect its true market value, as it may exceed what buyers are willing to pay. Similarly, the average price of properties in an area provides a general sense but doesn’t take individual property characteristics into account. The assessed value for tax purposes is often a different figure based on criteria set by tax authorities and does not represent the current market dynamics.