What is the difference between appraised value and market value?

Before buying or selling a property, it is important to understand the difference between appraised value and market value. Although both concepts relate to the value of a property, they are often confused, which can put a key decision at risk.

The appraised value is a legal concept regulated by Order ECO/805/2003: "It is the value that this Order establishes as such for each type of property or right to be valued. That value shall be the legal value, or the value with legal effects, for the purposes within the scope of this Order."

The Order applies when the value is used to apply for a mortgage-backed loan. Only appraisal companies approved by the Bank of Spain can issue these appraisals.

The market value, on the other hand, is "the price at which the property could be sold, by private contract between a willing seller and an independent buyer at the appraisal date, assuming the property had been publicly offered on the market".

The differences at a glance

• Purpose: the appraised value is used for mortgage guarantees, fair value, collective investment schemes and pension funds. The market value is used to know the value of a property portfolio, for inheritances, divorces, etc.
• Validity: the appraisal is valid for 6 months from its issue. The market value applies only at the valuation date.
• Type of report: appraisal report versus valuation report.
• Importance for the mortgage: the bank uses the appraised value (or the lower of the appraised value and the purchase price) as the reference to grant the mortgage.

In short, understanding the difference is key. If you want to be sure you make the right decisions, rely on companies approved by the Bank of Spain such as Tasvalor.