What is meant by "market value" in real estate?

Market value in real estate refers to the price that a buyer is willing to pay for a property and the amount that a seller is willing to accept for it, under normal conditions. This concept is grounded in the principle of supply and demand, where the market value represents a consensus on value based on the motivations and negotiations of participants in the market.

This understanding of market value is particularly important because it reflects current market conditions, including economic factors, property desirability, location, and comparable sales. It is not simply a figure pulled from past performance or set by one party's sense of worth but rather an interactive assessment from both sides in the transaction.

In contrast, the price set by the property owner alone does not necessarily reflect what the market would bear and may be influenced by personal biases or financial aspirations. Similarly, the estimated value of similar properties might provide a basis for judgment, but individual property variations and unique circumstances can significantly affect market value, making this approach incomplete. Lastly, historical prices, while informative, do not account for current market dynamics and can misrepresent what buyers are willing to pay at a given moment. Thus, the definition of market value encapsulates the active relationship and agreement between buyers and sellers in the marketplace, ensuring it is a