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

Market value in real estate refers to the most probable price a property would sell for in a competitive market, assuming that both the buyer and seller are acting in their own best interests and have access to relevant information. This definition highlights the concept that market value is determined by the conditions of the market at a given time, reflecting what buyers are willing to pay and what sellers are willing to accept.

In a competitive market, multiple factors influence market value, including supply and demand dynamics, property condition, location, and current market trends. Market value is not fixed; it fluctuates as these factors shift. When properties are sold under standard conditions—such as fair negotiations without undue pressure—the price at which the transaction occurs typically represents the market value.

This understanding of market value is essential for various real estate activities, including pricing properties for sale, appraisals, and determining potential investment returns. It contrasts with ideas such as listing prices or average neighborhood prices, which do not account for the actual transactional environment in which real estate operates.