Assessment Vs. Appraisal?
What is the difference between an Assessment and an Appraisal? If you don’t know the difference, don’t fret! It’s pretty common to get these two items confused. Many people use these two words, interchangeably, which is incorrect. Both define a value for a property, but there are some critical differences between an assessment and an appraisal.
The assessed value is a value that a city or township assigns to a property and is the value the municipality will use when they levy property taxes. The city assessor is responsible for assigning the assessed value to the property. The city will then establish a mill rate, which is multiplied by a number to determine the total real estate taxes. The assessed value of a property is not necessarily consistent with the property’s market value. In many municipalities, assessed value and market value can be very different. Assessed values can change over time, due to overall market shifts in an area, a property sale, or permitted work/changes an owner makes to their home (i.e., finishing a basement, adding a fence, upgrading electric, etc.).
An appraised value is a value that a professional appraiser assigns to a property. Although a homeowner or buyer can pay for an appraisal, this is often ordered by a bank/lender in conjunction with a property purchase or refinance. An appraiser will look at recent comparable sales (“comps”) in the surrounding area of a property and adjust for differences in the features of the subject property vs. the comps (size, beds, baths, location, condition, age, etc.). As an appraiser considers sales that have taken place within the last 6-12 months, this is usually a more accurate reflection of the market value of the property.