Perhaps people use the terms house evaluation and home value interchangeable, but there is a difference between them.
Property valuation, home evaluation or real estate appraisal is a process through which an opinion is given as far as the value of a property is concerned.
Properties are different from one another in many areas, but there is not centralized mechanism for pricing.
That being the case, there arises a need for an expert to do a real estate appraisal.
Appraisals or valuations in the United States are done according to the Uniform Standards of Professional Appraisal Practice or USPAP.
USPAP guidance provides that a valuation or appraisal may include fair market value, distressed sale value, investment value and foreclosure value, among others.
In 1989, the Financial Institutions reform act established that it is the states that are responsible for establishing a licensing and appraiser certification system, and that it is the states that must regulate appraisal practices.
What is actually sought through an appraisal is to establish the market value of a property.
This market value is actually the price that is paid by one party to another for the exchange of a property, while both parties are acting with knowledge, prudence and without external pressures and coercion.
While the USPAP does not establish a definition for market value, that is the guidance that it provides as far as market value is concerned.
Therefore, property valuation establishes the price that one person might pay another for a property, at a given time.
However, market value may not actually be the price that is set or the exchange that is made for the given property.
There are other factors that may come into play that may change the price of a property above or below market value.
There may be circumstances in a particular case where the seller may take less than market value, such as when there is a relationship between the seller and the buyer.
It may also be that the price paid for the transaction is part of a larger transaction, or even more factors may change the circumstances of an exchange.
There are specific buyers who may be willing to pay over market value for a house, such as when a builder needs a specific property in order to complete a building project.
In that case, the builder may be willing to pay a premium for the property in order to entice the seller.
Price may be different from market value depending on fluctuations in the market.
A buyers' market may cause downward pressure on house prices, perhaps as much as 3% to 5%.
Conversely, a sellers' market may cause upward pressure by 10% or more, depending on housing availability in a particular area.
If housing stocks are up and houses are not moving in a particular market, the glutted market will turn into a buyers' market.
When stocks are depleted, the reverse occurs, and sellers are able to set prices, just like they did during the boom times before the subprime mortgage loan crisis.
Market value is what a particular appraiser establishes, and price is what a particular buyer is willing to pay for the home.