This week is about the value of houses. What is the assessed value, what’s market value and what is the appraisal value…and why are they all different numbers?!
The market value is whatever a buyer is willing to pay for something. When you first decide to sell your house and you hire an agent, the agent will put together a CMA (comparative market analysis). This will determine what similar houses in your area have sold for lately and what the market says you can likely get for yours. You could put your house on the market for whatever price you want, but if no one is willing to pay that much for it, that value isn’t the market value.
The banks hire out an appraiser to make sure the loan they are giving out is an appropriate amount of money for what the house is worth. The appraiser determines the appraised value. It’s an unbiased estimate, separate from the listing or negotiated price. Sometimes this value will be the exact same as the market value, other times it’s radically different. If it’s lower than what a buyer offered, the bank will only loan out the appraised value. If it comes to that, there are a few options: the buyer will need to come up with the difference, the seller will have to drop the purchase price to the appraised value or they will have to meet somewhere in the middle. The latter is usually the case. In a today’s hot seller’s market, this is becoming a common problem.
And finally, the assessed value. It’s only used for tax purposes. They take the assessed value of your home – per a county assessor – and multiple that number by the local tax rate to determine yearly taxes. The assessed value of your home does nothing to affect what your home is worth on the market. It could be a whole lot higher or a whole lot less.