Assessed Value vs Appraised Value: The Value of A Home

bathroomClients often ask me about the different between a Property Tax Assessment with an Appraisal value.  If you are considering buying or selling a home, it’s important that you understand the each of these because they can often be considerably different.

Your local Tax Assessor’s office establishes an assessed value on homes and uses a combined total to calculate the tax rate, i.e. the millage rate.  The local government determines your home’s worth by reassessing the homes in the area you live in periodically.  This is usually done every few years.  While this is specific to your area, it is NOT specific to your home.

An appraisal is completed when an Appraiser uses similar recently sold properties to establish a market value.  In the real estate market, these are called “comparables” or ‘comps’.   The Appraiser has guidelines to follow for finding appropriate comps which can vary depending upon the type of home.   For a typical single family home in a well populated area the Appraiser will look for comps with similar square footage, within a certain radius of the subject home, similar features, (such as basements, garages, number of bedrooms, etc.).   The Appraiser may not find the exact type of homes to do true comparisons.  In that case, they will  choose a close match and can adjust for the difference.  For example, the property is a 3 BR/2 BA home on a crawl space, and the comp is a 4BR/2 BA home with a basement.  The Appraiser will adjust the comp down and deduct for the extra bedroom and basement.

Why is all of this detail important?  Because it allows you to see just how an appraisal can affect the value of your home.   You can order an appraisal prior to putting your home on the market but usually appraisals are ordered for a home during a purchase and sell or refinancing agreement.  Banks and other lenders will always require an appraisal prior to disbursing any money.  This assures them that the property is worth the money they will be lending.

I typically include an Appraisal Contingency in the offer which states that the purchase price of the home must be equal or lower than the appraisal report.  It is important to note that if the purchase price is more than the appraised value and the seller refuses to lower the price, the buyer does have the option of paying the difference in appraised value and purchase price in cash.

Property tax assessments and appraisals are often very different from one another. I have seen tax assessments above appraised value and I have seen them well below appraised value. You cannot look at the tax assessment and know the true value of your home.  A CMA, (Comparative Market Analysis), report is not as detailed as an appraisal but can give you a very good idea of your home’s value.

Contact me and we can discuss your plans.  I would be glad to help you determine your home’s value by providing you with a CMA report.

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