The differences between Assessment, Appraisal and Market Value are often confusing to consumers and real estate professionals alike. Here is the short and sweet of it.
This is the value that the government has established in order to establish the tax rate on on the real estate. The taxing authority has established complicated models based upon which they base these assessments. Sometimes they are exacting and scary and sometimes they are just off the wall. Remember, the taxing authority is only assessed based upon information in the tax record. If they haven't been in the home, they assume average condition for items and don't take into account: deferred maintenance, upgrades, or additions that didn't get into the tax records. Taxes are assessed in some areas in different years - so adjustments up or down in the same neighborhood can be deceiving in changing markets.
- During ownership a low assessment is wanted by everyone
- During a purchase both the buyer and seller want a high assessment
You can appeal your assessment!
A licensed appraiser, who is often a third-party, is ordered by the bank making the loan.
The job of the appraiser is to:
- establish value using different methods;
- visiting the subject property;
- preparing a detailed analysis that supports their opinion of value.
An appraisal is scrutinized more closely when loan to value ratios are high, and a second appraisal might be requested. But, alas, an appraisal should be but somehow isn't market value. It is based upon the past, and in a rapidly changing market it is...well, yesterday's news.
Market value is simply the balance of what the buyers are willing to pay and the price at which sellers are selling! That can be more than the appraised value as in the case there someone guts and upgrades the kitchen in a new home well beyond what the neighborhood comps would support. Or much less, like a really busy street where the appraiser doesn't make the adjustment, but the buyers sure do and the home on a busy street during certain markets can be worth as much as 5-15% less than comparable homes!
The market value can be driven by a specific group of buyers who want certain things in certain neighborhoods, like a front porch. The competition can artificially drive up the market value for a brief period and then the buyer pool changes and they all want larger yards and the owners who are not focused on the market every day are left wondering what happened.
So what is the value? It depends on who is looking...
Yvette Chisholm, Associate Broker, MD, DC, VA
Alan Bruzee, Associate Broker, MD, DC, VA
Long & Foster Real Estate, Inc.
Rockville/King Farm Office 301-548-9700
402 King Farm Blvd #150 Rockville, MD 20850
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