Assessed Vs. Appraised: How to Estimate the Value of your Home

By: John West

Assessing the value of your home can be confusing when there are different approaches to estimating value. Below is a breakdown of assessed and appraised values, and how they can effect your listing price and the current market value of your home.

Assessed Value:

Assessed value is a value placed on a home by the town's assessor strictly for tax purposes and is used to create and gradually raise the town's tax revenue. An entire town will be assessed yearly with values determined by a qualified team who'll ideally survey numerous properties in different neighborhoods and look at recent sales. The calculated tax rate will be based on the combined assessed value of all the town properties. Ideally this assessed value should reflect the going market value of the properties in your town, and neighborhood. But while tax assessors are required to determine the value of properties in their jurisdictions each year, they're not required to adjust the assessed value of those properties to reflect market value. Also, different town's may have different parameters for determining assessed values, such that it's possible that the assessed value will not reflect the true market value of a home. In this case, the only way to better determine the possible worth of your home is to have it appraised.

Appraised Value:

An appraiser will complete a report on your home to determine it's value. This is called an appraisal. In a situation where you're asking to use a home or other real estate as security for a loan, a lender will require a certified appraisal to make sure that the property will sell for at least the amount of money it's lending. Likewise, an appraisal is an accurate way to determine the market value of your home.

Generally an appraiser will use a combination of approaches to accurately determine a fair and current value of your home.The Market Approach, is one method whereby an appraiser will compare recently sold, similar properties and make adjustments between the subject properties and it's comparables.The Cost Approach is a method where the appraiser will determine the cost to re-build the property in question. Lastly, the Income Approach is a method that relates to income-producing property. It is based on the theory that part of a home's value is the present worth of the income stream which the property is capable of producing when developed to it's highest and best use. The net operating income from the property is capitalized into value by an appropriate method and rate. Generally, an appraiser will use a combination of results from all three of these methods to complete your home's appraisal.

So, before you assume that your home's assessed value is a fair representation of it's market value, consider hiring an appraiser to get a better look into the current worth of your home.

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