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Appraisal vs. Assessment

The terms appraised value and assessed value are frequently used interchangeably by home buyers and sellers but the differences make for an apples and oranges type of comparison.

Appraisal

AppraisalAn appraisal value represents the fair market value of a house based on comparable sales, condition and location of the property, size and number of rooms and type of construction.

Appraisals are generally done in connection with mortgage financing and the number used is a base to determine how much money to lend. Banks and mortgage lenders don't want to loan out more than a property is worth.

Assessment

AssessmentAn assessment, on the other hand, is the value of a house as determined by the town or city tax assessors, using a formula based on recent sale prices of comparable homes and other items.

Ideally, the assessed value (for taxes) and the appraised value (for the mortgage loan) should be very close but don't count on it if the market has been through some fluctuations or a property has been improved through renovations or additions that have not been reflected in the current assessment.

An assessment is probably not a good benchmark for a house's value because of a possible time lag since the last assessment and variability in assessing practices from community to community.

A good Buyer's Agent can show you how to use tax assessed values as a legitimate comparison to other properties in the area.

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