Home Appraisals and Assessments
What are the differences between a home appraisal and a home assessment?
Home Appraisals and Home Assessments
Do you know the difference between a home appraisal and an assessment? Some people believe these are the same, but they are completely different.
An appraisal is defined as an estimate of current market value, and is usually carried out during the purchase or refinancing of a property. The lender requests an appraisal to ensure that the property has sufficient value to cover the requested loan. An appraiser calculates the estimated market value by examining 'comparable sales'. They look for recent property sales in the same neighborhood, for similar size properties and use the sale price to calculate an estimated value. In order to calculate the estimated value the appraiser apply various multipliers to compensate for any differences between the property to be valued and the comparable's. For example, if the property to be valued has a 3 car garage and the comparable has a 2 car garage, in order to compensate for the additional garage space the appraiser may add a set amount to the comparable's sale price.
Assessments are home values by the local government for the purpose of property taxation. Depending upon where you live, this valuation could be the actual market value or a percentage of market value. In most U.S. States, the local government has access to home sales information, this is used to derive the property tax valuation. This is not true for all States, for example, Utah is a nondisclosure State. In non-disclosure States the local government relies upon its own appraisers, whose job it is to derive valuations. Because of this, it is very common for property taxation valuations to be substantially different from the actual market value. This is particularly true for older homes, in areas where the property values are experiencing large price fluctuations, or for homes that have undergone substantial renovations / improvements.