What does it mean appraised and assessed value?
When it comes to determining the worth of a property, two terms commonly used are “appraised value” and “assessed value.” While these terms are often used interchangeably, they have distinct meanings and serve different purposes in the realm of real estate.
The **appraised value** of a property refers to the estimated market value determined by a professional appraiser. This value is reached after a thorough examination of the property’s size, condition, location, amenities, and recent sales of comparable properties in the vicinity. Appraised value is important for buyers, sellers, and lenders as it provides an objective assessment of the property’s worth.
On the other hand, **assessed value** is the value placed on a property by a local government or tax assessor for the purpose of calculating property taxes. Assessors typically assign values based on a variety of factors, including the property’s size, location, age, and overall market conditions. Unlike appraised value, assessed value is primarily used for tax purposes and can vary significantly from the appraised value.
What factors determine appraised value?
Appraised value is determined by a professional appraiser who considers factors such as the property’s location, size, condition, amenities, recent sales of comparable properties, and overall market conditions.
How often is a property appraised?
Properties are typically appraised before a sale, refinance, or when a new mortgage is obtained. However, the frequency of appraisals can vary based on individual circumstances and lender requirements.
Who hires an appraiser?
Typically, a mortgage lender or bank hires an appraiser to ensure the property’s value aligns with the loan amount being requested. However, buyers or sellers may also choose to hire an appraiser independently to get an unbiased evaluation of the property.
What role does appraised value play in a mortgage loan?
Appraised value is crucial in a mortgage loan process as it helps lenders determine the loan-to-value ratio (LTV). LTV is the percentage of the loan amount compared to the appraised value. It impacts the down payment requirements, interest rates, and mortgage insurance premiums.
Can appraised value be negotiated?
While appraised value is usually an objective assessment, buyers and sellers can challenge the appraisal if they feel it is inaccurate. They may present additional evidence, such as recent sales of comparable properties, to support their case.
What happens if the assessed value is higher than the appraised value?
If the assessed value is higher than the appraised value, it may result in higher property taxes for the homeowner. However, if the appraised value is higher, it can provide an opportunity for the homeowner to appeal the assessed value and potentially lower their property tax burden.
How does assessed value affect property taxes?
The assessed value directly impacts the property taxes a homeowner must pay. It is used by local governments to determine the tax rate and the amount owed by each homeowner based on their property’s value.
Can the assessed value increase even if the market value decreases?
Yes, the assessed value can increase even if the market value decreases. Local governments reassess properties periodically and may adjust the assessed value based on factors such as property improvements or changes in the local market conditions.
What can I do if I disagree with the assessed value?
If you believe the assessed value is too high, you can appeal the assessment. This typically involves providing evidence such as recent sales of comparable properties or highlighting any errors in the assessment process.
Which is more important: appraised value or assessed value?
The importance of appraised value versus assessed value depends on the purpose. If you are buying or selling a property, the appraised value is crucial for setting the sale price or securing a mortgage loan. However, the assessed value determines the property tax liability.
Do appraisals and assessments consider the same factors?
While both appraisals and assessments consider factors such as location and property size, they have different objectives. Appraisals focus on determining market value for buyers, sellers, and lenders, while assessments primarily determine property taxes owed to the government.
Are appraisals and assessments standardized across different areas?
Appraisals can vary slightly between different appraisers, but they generally follow a standardized approach. Assessments, on the other hand, can vary significantly between different jurisdictions as property tax laws and assessment methods differ from one municipality to another.