Many people think that appraisals and assessments are the same thing. Although they both are an attempt to determine the value of a property or home, the similarities end there.

Appraisals are performed by licensed appraisers in an attempt to determine the value of a home or property for private purposes such as mortgages or refinances. A homeowner may hire an appraiser to determine how much equity their home has gained or a bank may have a property appraised to determine if the property has enough value to back a loan or mortgage. Appraisals for commercial properties are determined by how much it would take to build the property at that time. The income stream of a property such as a rental house is determined by how much an investment (the home value) would generate at a specific interest rate. While appraisals from different appraisers may differ slightly depending on the value each places on amenities, rooms and location, they are generally close.

Most appraisers use what are called “comparables” to determine the value of a home. Comparables are properties the same area that are similar to the property being appraised. An appraiser looks at homes that have been sold in the area recently for a starting baseline for the appraised home and then they add and subtract for amenities that the target home has or does not in comparison with the comparables. This, along with the intangible qualities of a property such as location, view and upkeep, allows the appraiser to determine the value of the property.

Similarly, assessments are also determinations of a property’s value. Unlike appraisals however, assessments are done by the government in an attempt to determine a property’s value for property tax reasons. Another difference between appraisals and assessments are they the guidelines for determining property value may differ from county to county. While different appraisers may have slight differences in their home values, the county or city guidelines governments use to determine tax value can vary drastically. Another factor in property value in assessments is the purpose of the property and the zoning area it resides in.

The differences between appraisals and assessments can have both negative effects. If an assessment determines a home is worth more than an appraisal, the homeowner is forced to pay a higher tax rate for a home that has a lower market value. Conversely, a homeowner might end up paying less in taxes than the market value of the home would dictate.

For more information on home values, appraisals, mortgages and refinancing, feel free to visit our website at www.callALMS.com and chat live with our staff or read our extensive articles for more financial information!

Tags: appraisal, home equity, home value, house value, tax assessment

This entry was posted on Tuesday, November 24th, 2009 at 5:40 pm and is filed under Industry Information. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.