Recently I spent at least 45 minutes trying to explain to a client why there are different values attached to a home appraisal for the lending bank, appraisal for property taxes and market value of the home. There appears to be significant confusion with all of these itens and that is the purpose of my blog entry. Anyone who has additional thought please share those with all of us.

Bank Appraisal - When a Buyer goes to any lending institution asking for a home purchase loan the lending institution will require that an appraisal be made on the subject home. The mortgage lender will hire a propfessional apraiser o do the work. The bank does want to lend $450,000 for a home that has appraised value of $200,000.The appraisal assists the mortgage lender in assessing its actual value. An appraisal will examine the home condition, location, features and comparable property sales in the same neighborhood or surrounding area. The potential buyer will have to pay for the appraisal and if the property appraises for less than the loan amount the mortgage lender will reject this loan in its underwriting department.

The bank appraisal has absolutely nothing to do with the annual appraisal conducted by the local taxing authority.

Tax Appraisal - Once every year the local taxing authority appraisal district will conduct their own appraisal of the home to estabish a basis for charging property and school district taxes. Each appraisal district has its own group of appraisers who work for them and they make their own unique judgement as to the value of the home or property. Each taxing authority has established and published regulations which allow home owners to protest their appraised value. Its necessary for each individual to check their taxing authority web site to obtain their rules and required forms so that they can protest the tax appraisal value if they feel that the established appraised value is too high.

Market Value- The market value of any home is not in any way related to cost that current owner paid to buy the home. The market value is initially establish by an experienced and competent real estate agent. The analysis will consider such items as location, condition of the home, square footage, features, and what other comparable homes/properties  have sold for in the recent past and what competing homes in the same neighborhood are listed for at that point in time. The market value eventually will be set when the seller of the home and a buyer agree to transaction and the sale actually closes

Does anyone have anything they would like to add or comments?