When it comes to the sale price of a home, the numbers aren’t random. They are determined by professional appraisals that consider location, comparable sales, the condition of the property, and other factors.
As you purchase a home, you must understand what an appraisal is and how it’s different from an assessment.
Appraised Value Determines The Fair Market Value Of A Property
Getting a home appraised is an essential part of purchasing a home you know is safe and up to code. It also helps determine the fair market value of a property. Your lender will order the appraisal, and you will pay a one-time, non-refundable fee.
An appraisal is done by an unbiased professional who will look at market data and public records before comparing them to similar properties in the area. Then, the appraiser will issue a report detailing the property and its fair market value, or how much a property would sell for on the open market when certain conditions are met.
Using that report, lenders will approve or deny a loan, as they can’t issue a home loan if the appraised value is less than the loan amount.
Assessed Value Determines Property Taxes
The assessed value is different from a property’s appraised value in that it is used to determine property taxes. An assessor will evaluate your home through public records to determine details such as its size, age, location, and construction type. Then, that information will be submitted to your local government. If an assessment is lower than an appraisal, don’t worry, it doesn’t mean that your home is worth less!
An assessment typically doesn’t affect the sale of a home, as an appraisal is used. If an assessment of a home is lower than the home’s fair market value, you can ask the seller why. If there are still unpaid property taxes on the house, be sure it is clear who pays them.
Always Double Check All Estimates & Disclosures
After you have your home appraised, double-check your closing statement and loan estimate for discrepancies in fees and payments. If a number has changed, ask your lender to explain the reason why. This will prevent you from needlessly overpaying.