Appraisal vs. assessment: The basics
Assessments and appraisals are particularly important when you plan to sell your home because it will help determine Fair Market Value. Appraisal and assessment values are often mixed up with one another, but are quite different. For example, the combined assessed value of all the properties in the city calculates your tax rate, but an appraisal is used by banks to ensure the value of the property meets or exceeds the amount they are lending to the homeowner. Below we take an in-depth look at the differences between assessment and appraisal values.
What Are Assessment Values
An assessment is the value placed on a home by the city’s assessors office that help determine the property tax due. The amount due is derived from a percentage and an assessed value of the real estate. Assessments are used strictly for calculating taxes and do not necessarily coincide with the real estate market value. Each city formulates assessed value based on different features such as:
- The amount of land
- Interior living area
- Exterior amenities such as sheds, garages or a pool
- Interior square footage
A property can always be reassessed, meaning the property tax rate can increase annually.
What Are Appraisal Values
An appraisal is a calculation of the current market price of a property by a licensed professional employing approved procedures. As stated above, banks use appraisers to confirm that the value of a property meets or exceeds the amount they are lending to the future homeowner. This protects the bank’s investment given that they bear the majority of financial burden until you lower the balance of your loan.
Appraisers look at:
- Square footage
- Number of bedrooms and bathrooms
- Condition of the home
- Recently sold comparables
An appraisal typically costs near $300. Keep in mind that without an appraisal no credible bank or financial institute will lend you money.
When all is said and done, the actual value of a listing is determined by what a buyer is offering to pay, which will change continually depending on factors such as availability of options. Consumers should be careful when associating assessed values with the selling price of real estate since they do not adjust in tandem. Some counties infrequently change assessed values and increase tax amounts instead. Only an appraisal can offer a reliable determination of current market price.