When homeowners talk about the value of their home, I often hear the words appraisal and assessment used interchangeably. And now, with online home values everywhere, there are even more numbers competing for our attention.
But an appraisal, a town assessment, and a Comparative Market Analysis (CMA) are not the same thing—and understanding the difference can help you know which number actually matters for your situation.
What Is a Home Appraisal?
An appraisal is a professional opinion of value completed by a licensed appraiser for a specific purpose.
Most commonly, an appraisal is ordered by a lender to verify the value of a property when someone is purchasing or refinancing a home. Appraisals may also be needed for other purposes, including:
❖ Estate planning or settlement
❖ Divorce proceedings
❖ Certain financial or legal situations
❖ An independent opinion of a property's value
The important distinction is that an appraisal is performed by a licensed appraiser. Real estate professionals generally do not perform appraisals unless they also hold an appraiser's license.
What Is Your Town Assessment?
Your home's assessed value serves a very different purpose.
The town uses the assessment of your property as the basis for determining your property taxes. It is not intended to tell you exactly what your home would sell for on the open market today.
That is why your assessed value and current market value can be different—and why you shouldn't automatically assume that your assessment represents what your home is worth to a buyer.
If you believe your property has been assessed incorrectly, there is a process for requesting an abatement. The requirements and filing deadlines are established by the municipality, so homeowners should check directly with their local assessor's office if they have questions about their assessment or tax bill.
Where Does a CMA Fit In?
This brings us to the number that is usually most important when you're thinking about selling your home.
Real estate professionals prepare a Comparative Market Analysis, or CMA, to help determine a home's likely value in the current real estate market.
A CMA looks at the property along with relevant recent sales, competing listings, location, condition, features, improvements and—something an online algorithm can't fully understand—the characteristics that make one home different from another.
The goal is to answer a very practical question:
What is today's market likely to pay for this particular home?
And What About Online Home Values?
Automated Valuation Models, or AVMs, can be useful as a starting point, but they rely on available data to generate an estimated value. That data can include public assessment information, building permits, sales records and other sources.
As I discussed recently, an online estimate is another tool in the valuation toolbox—but homeowners need to understand what that number actually represents.
If an algorithm has never been inside your house, how much should you rely on its opinion of what your house would sell for today?
Three Values—Three Different Purposes
An easy way to remember the difference is:
❖ Assessment: Primarily used by your municipality for property taxation.
❖ Appraisal: A licensed appraiser's opinion of value prepared for a specific purpose, often for a lender.
❖ CMA: A real estate professional's analysis of the current market to help determine a property's likely market value and appropriate pricing strategy.
One isn't necessarily "right" and another "wrong." They are different valuations created for different purposes.
Wondering What Your Home Is Worth in Today's Market?
You don't need to be ready to sell tomorrow to understand where your home fits in today's market.
If you're curious about your home's current market value, I'd be happy to prepare a Comparative Market Analysis and explain not only the number, but what's happening in the market behind that number.
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