What does market value refer to in the context of property valuation?

Market value in the context of property valuation refers to the amount a willing buyer would pay for a property in an open and competitive market. This concept hinges on the principle of supply and demand, where the price is determined by what buyers are prepared to offer and what sellers are willing to accept. It reflects the most probable price that could be achieved in a typical transaction, assuming both parties are acting in their own best interests and are fully informed.

Understanding market value is essential for various stakeholders, including buyers, sellers, lenders, and appraisers, as it provides a realistic picture of a property's worth based on current market conditions. This value can fluctuate based on economic factors, location, property condition, and comparable sales in the area.

Other valuation methods, like construction cost or land-only considerations, may not capture the true market dynamics or the complete picture of a property's value, making the understanding of market value critical in property transactions. Additionally, local government valuations may serve specific purposes, such as taxation, but those figures do not necessarily reflect the current market conditions or the price at which properties would actually sell.