When it comes to the value of a home, there are two terms that are often used interchangeably but have very different meanings: assessed value and appraised value. While they both involve valuing a property, they are used for different purposes and can have vastly different numbers. In this article, we’ll take a closer look at what these terms mean and why they matter.
The tax-assessed value is the value of a property as determined by the local county or municipality for the purpose of calculating property taxes. This value is typically calculated using a formula that takes into account factors such as the size of the property, its location, and any improvements that have been made to it. However, it’s important to note that the assessed value is not necessarily the same as the fair market value of the property. In fact, it’s not uncommon for the assessed value to be significantly lower than the fair market value, especially in areas with rapidly rising home prices.
It’s also worth noting that the assessed value is only used for tax purposes and does not necessarily reflect the true value of the property. This means that a property with a high assessed value may not necessarily be worth that much on the open market.
The appraised value, on the other hand, is the estimated value of a property based on its condition, location, and comparable properties in the area that have recently sold. Unlike the assessed value, the appraised value is used for a variety of purposes, including mortgage lending, estate planning, and property sales.
A home appraisal typically involves an on-site inspection by a professional appraiser who will evaluate the property based on a variety of factors, including its overall condition, the quality of its construction, and any upgrades or renovations that have been made. The appraiser will also take into account the location of the property, as well as the prices of similar properties in the area that have recently sold.
The appraised value is typically more accurate than the assessed value when it comes to determining the true value of a property. This is because it takes into account a wider range of factors and is based on current market conditions.
Relationship Between Assessed Value and Appraised Value
While the assessed value and appraised value are two different things, there can be some overlap between the two. In some cases, the assessed value may be used as a starting point for determining the appraised value, especially if the property has not been recently appraised. However, in most cases, the appraised value will be significantly higher than the assessed value, especially if the property is located in an area with high demand and rapidly rising prices.
It’s also worth noting that the relationship between assessed value and appraised value can vary depending on the location of the property. In some areas, the assessed value may be a more accurate reflection of the property’s true value, while in other areas, the appraised value may be more accurate. Additionally, the rules and regulations surrounding property assessments can vary widely from state to state and even from county to county, which can further complicate matters.
In summary, while both assessed value and appraised value are used to determine the value of a property, they serve different purposes and can have vastly different numbers. The assessed value is used for tax purposes only and may not necessarily reflect the true value of the property. The appraised value, on the other hand, is based on a wider range of factors and is used for a variety of purposes, including mortgage lending and property sales. While there can be some overlap between the two values, it’s important to understand the differences between them in order to get an accurate picture of a property’s true value.