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Assessed vs. Appraised Home Value: What's the Difference?

By
Real Estate Broker/Owner with Charles Stallions Real Estate Services 610125

 

Home sellers often face confusion around assessed and appraisal values when planning their home selling process. This is a common issue because they both affect a home’s value but in different ways.

Stated, assessed values are all about how your local governments tax your property to earn income to provide community services, while appraised values are what mortgage lenders use as “insurance” before lending buyers money to purchase your home.

We discuss more details so you can prepare for your home sale and negotiate the best deal with future home buyers. 

Assessed Value

Think of your house’s assessed value as how city and county governments measure how to tax your property—NOT how much you could sell your house in the future. Local tax officials follow guidelines and laws that spell out how homes are assessed and incorporate your community’s tax rate details. Some jurisdictions send assessors to see the property; others do not. 

Assessors rely on multiple years of property data, home inspections, and sometimes comparative market analysis to complete their findings. Once finished, they calculate the property’s assessed value. Local governments use these property taxes to pay for schools, public safety, and other community resources. 

What Happens After the Appraisal? 

If your appraisal meets or exceeds your asking price, you’re in good shape, and everyone can move toward closing. But what are the options if your house appraises under the contract price?

  1. You can ask for another appraisal, especially if you find a discrepancy, like incorrect square footage, in your report. 
  2. You can ask your buyers to make up the difference between the loan amount and the purchase price. 
  3. You can renegotiate the purchase price with the buyer. 
  4. Your buyer may have an appraisal contingency in the contract, which allows them to walk away from the deal with their earnest money.

Why Did Your House Appraise Low? 

Knowing why your house appraised low will help you decide how to proceed. If you're using the services of a real estate agent, they can be an important resource in this situation.

Scour the appraisal report and look for inaccuracies, and also compare the details to comparable homes that have closed recently. These are some of the criteria the appraiser researches, and they need accurate facts to reflect your home’s true value, especially in competitive markets. 

Low appraisal indicators:

  • Incorrect living area measurements
  • Wrong bathroom and bedroom counts
  • Dissimilar location comparables 
  • Home improvements were not accounted for, like a finished basement 
  • An inexperienced appraiser who doesn't understand local trends
  • Excessive foreclosure or short sales in the neighborhood
  • Inflated prices from multiple offers
  • Overpriced home

Now that you’ve seen the differences between assessed and appraised values side by side, it’s simple to see how they fit into your home selling plan. Just remember that assessed values equal property taxes, while appraised values involve mortgage lenders and buyers. 

Although the assessed value doesn’t directly affect your home sale process, it is a consideration for your buyers. They’ll have to consider the property taxes in their home-buying budget. If your property taxes are inaccurately assessed too high, it could add another roadblock for your buying pool.   

Appraised Value 

Appraised values directly affect a home sale because they’re used to determine the home’s actual value. After your property goes under contract, your buyer’s lender will request an appraisal to determine the house's current market value so that they don’t loan the buyer more than it is worth. 

The appraisal is part of the mortgage underwriting process and far more in-depth than an assessment, and the findings ultimately affect the mortgage amount and sale price. Remember, the appraised value is insurance that the lender is making a good investment. It also helps the buyers and sellers get a clear picture of the property’s value to negotiate the purchase price. 

The Appraisal Process

Highly trained and licensed appraisers usually spend a couple of days to about a week to complete the appraisal. It depends on how busy your market is and your location. Remember that if the appraiser is from a VA or FHA lender, they’ll have more criteria to check. 

Before arriving, the appraiser does homework with the property’s online data, but they will also consider the location, the house’s general condition, square footage (including the number of bedrooms and bathrooms), special features, and nearby comparable homes sold within 180 days. They’ll also take into account the conditions of the following: 

  • Foundation
  • Basement
  • Appliances
  • HVAC system
  • Additions and renovations

If you plan to sell your home for sale by Owner, consider hiring an appraiser as part of your pricing strategy. I can help you decide. 

Check out the latest Guide to Selling Your Home.

Are you looking to sell your home? Click here for a Free Appraisal and a Guide on Selling Your Home in the current market.

Need to sell your home before you buy and are concerned about managing two payments? Click here to receive an instant offer today and see if it suits your needs.

We charge a 1% Commission with no hidden fees or gimmicks—not the average 5, 6, or even 7% charged by others. This saves the average homeowner $12077.00. We offer a 206-step selling system with 28 specifics tailored to your home's marketing.

If you’re ready to sell your home, you need a marketing expert. Charles Stallions, with over 28 years of experience, will advise and guide you through approximately 184 potential challenges that can arise during and after your home sale, ensuring a smooth closing. Call Charles NOW at 850-476-4494 for a 7-minute phone analysis of your home's value.

At Charles Stallions Real Estate Services, we utilize our TRI-merge System, which is known for its impeccable accuracy. We integrate data from the MLS, Zillow, Tax Rolls, and an appraisal evaluation system, along with one other secret ingredient, to determine the TRUE VALUE of your home.

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Michael Elliott
Fathom Realty - Burlington Township, NJ
Burlington, New Jersey Residential Sales

This is great information for sellers, and quite often the terms are misunderstood. 

Apr 22, 2024 02:48 AM
Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Apr 23, 2024 04:34 AM