I get this question sometimes in speaking with property owners at the door, as some people doubt that the appraised value is meant to be the same as the full market value for the property. The full and proper answer to this question is “… it depends” but the short answer is “yes”.
The Appraisal Institute of Canada, one of the governing bodies for appraisers in Canada defines market value as follows:
“The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to a fair sale, with the buyer and the seller each acting prudently, knowledgeably, and for self-interest, and assuming that neither is under undue duress. “
This definition is a little over top but in a nutshell it means yes, market value is what it would sell for if you hung a for sale sign out there today (or whatever date it is supposed to be valued for). Its not the appraisers job to be conservative, or to be optimistic, just realistic.
The main “depends” part is sometimes lenders put requirements on the valuation the limit what can be included in the valuation for a mortgage. Most often excluded are acreage above 5 acres, 2nd and 3rd garages or other outbuildings that are not residential. If you have 230 acres, a dog grooming salon, three garages and a barn, don’t expect to get a mortgage that includes all that extra stuff. Every lender has different rules so be aware of this when you are shopping around. Appraisers just have to accept whatever rules the lender applies, full stop.
Are there other reasons that people think that appraised value doesn’t equal market value? Well currently in Ontario the government has confused the issue a lot because since 2016 MPAC has not been allowed to update their values that municipalities rely on to set property taxes. MPAC is still telling you what your property was worth in 2016, that is their “assessed value”.
Another reason that people may think appraised values differ is that many folks (myself included) think of what they could sell their house for, and this number in their (and my) head is what the house would sell for after they fixed all those things that they had fully intended to fix, and probably will fix before selling the house. This is not the house I’m taking pictures of today. Appraisals are AS-IS. You wont get overly punished for the odd bits of things that are left undone but you won’t get credit for the gazebo you planned to build or the new bathroom vanity that is sitting in the garage at the moment.
I hope this explains the question of appraised value vs. market value.