Assessed value and appraised value are commonly confused by buyers and sellers of residential real estate. If assessed values are low, buyer think that that is what a house is worth. If assessed value is high, sellers think that that is the value.
Assessed value is almost exclusively reserved for property taxation purposes. The assessment is the value placed on a property by the town or city's assessor's office for the purpose of determining the property tax due. Every few years, the town will spend 4-12 months viewing, and evaluating properties. The combined assessed value of all the town properties will then be used to determine tax rate. Each year the town may re-evaluate the tax rate to obtain the monies needed to run the town based on that combined assessed value.
Appraised value is often used when purchasing a home or refinancing a home loan. Lenders rely on appraised value as part of the loan approval process. An appraisal is ordered by the bank and performed by a licensed appraiser. The appraiser will look at recently sold properties and compare them to the subject property to determine value. They will make adjustment for size, location and condition to name a few. This method is called the “Market Approach”. A second method called the “Cost Approach” will also be used.
Assessed value and appraised value are often different, especially in a housing market that is either a buyer or seller market. In a buyer’s market, you may see rapidly declining values, while in a seller’s market you will see increasing sales prices.
Pam Crawford, ABR,e-PRO®,CRS,CDPE,LMC
Owner, REALTOR®, Managing Partner, MBA, BSBA
RE/MAX Professional Associates
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