304 North Cardinal St.
Dorchester Center, MA 02124
304 North Cardinal St.
Dorchester Center, MA 02124
Counties, municipalities and cities impose property taxes on homeowners. The funds from the collected taxes are used for various purposes such as schools and public safety. Tax jurisdictions determine the tax rates and the methods used to assess the properties. Commonly the tax assessor – or group of assessors – review property data from previous years or visit the properties in person to determine the assessed value. A home tax assessment is simply used to determine the value of the property for taxation purposes and may or may not reflect what you could actually get for the property if you sold it. The assessed value of your home is what the local government uses to calculate property taxes.
Since mortgage lenders want to make sure they are not over-lending on a property, they will have a professional appraiser conduct a thorough evaluation of the home. When determining the fair market value of the property, real estate comps and appraisals play a role in setting the price. Typically, a rough estimate can be determined based on the square footage in relation to similar properties in the area.
Your home’s appraised value represents the fair market value of the property. In summary, while both assessed value and appraised value are used to determine the value of a property, they serve different purposes and can have vastly different numbers. The assessed value is used for tax purposes only and may not necessarily reflect the true value of the property. The appraised value, on the other hand, is based on a wider range of factors and is used for a variety of purposes, including mortgage lending and property sales. While there can be some overlap between the two values, it’s important to understand the differences between them in order to get an accurate picture of a property’s true value. There can be significant differences between the two numbers, which in many cases works out in people’s favor.
Essentially, the market value determines how much a home will cost. By now, you’ve probably encountered plenty of real estate jargon – like assessed value versus market value, and what’s the difference? In short, assessed value is the home’s value come tax time while fair market value is the cost to buy a home in that area.
And if you’re interested in buying a home, you want to know that the listed price is fair for the market. For instance, if a property’s assessed value is $150,000 but the seller has it listed for $300,000, you can use this information to find out why there’s such a discrepancy and potentially negotiate a lower price. Use the information provided in your property tax bill and your county’s real estate tax rate. The homestead exemption includes property tax exemptions if the homeowner is the owner-occupant.
Market value is used by lenders, buyers and sellers to estimate the appropriate selling price given current market conditions. It’s essentially the value that assessors attempt to come up with before applying the assessment rate. The appraised value of a home is most commonly needed when the property is being purchased with a new mortgage loan or the existing loan is refinanced. The mortgage company wants to make sure they aren’t lending more than the property is worth. Appraisals are used to determine the fair market value — what someone would actually pay for the house if listed on the market. You may also use an appraisal to prove the value of the home for other reasons, such as for a property tax appeal.
The millage rate is the tax rate applied to the assessed value of the property. Millage rates are typically expressed per $1,000, with one mill representing $1 in tax for every $1,000 of assessed value. So, for calculation purposes, if the mill rate in your jurisdiction is 20, divide that by 1000 to get .02. Each week, Zack’s e-newsletter will address topics such reporting and analyzing current liabilities as retirement, savings, loans, mortgages, tax and investment strategies, and more. No number is right or wrong; the ultimate deciding force is what price a buyer and seller determine they are willing to shake hands on to close the deal. A home’s market value is often a good starting point for determining all kinds of concerns that home buyers might have.
Your home’s value is destined to change over time depending on various factors within and outside of your control. For example, a state-of-the-art community event center can be proposed to be built within the bounds of your neighborhood—driving up the property value. Alternatively, a new study showing an increased crime rate in your city may drive your home’s value down. We’ll be happy to help you better understand the difference between appraised and assessed values and how they relate to the home buying process. Sarah Sharkey is a personal finance writer who enjoys diving into the details to help readers make savvy financial decisions.
If the second appraiser finds discrepancies with the first valuation, your lender may be willing to accept a different value. For example, if you bought a home several years ago and the value increased, you have more home equity. You can leverage this to qualify for refinancing or secure a home equity loan. For example, say the market value of your home is $150,000 and the assessment rate for your county is 80%. Government assessors are usually designated by specified tax districts.
The assessor may adjust the determined assessed value based on the specifics of the home in question. If, however, you have made recent upgrades such as bathroom or kitchen renovations that didn’t require a building permit, the assessor could boost your assessment accordingly. In any case, appealing an assessment is not guaranteed to lower your home’s assessed value, but it won’t cost you anything to try. Appraised value represents the objective value of your home and is established by a licensed expert. This value is critical for helping lenders determine the loan-to-value ratio when approving a mortgage.
An appraised value is the finding which most frequently comes into play if a property is being bought or refinanced, however. Appraised values are useful because a company’s balance sheet will report its land and buildings at the cost when they were acquired and will report the accumulated depreciation of the buildings. (Land is not depreciated.) Therefore, if the company wants to refinance its real estate, a current appraisal will usually be required. In the end, the assessor comes up with an assessment value of a home and deducts any tax exemptions for which you qualify. The assessment on a residential property will likely be different than a commercial one or one for agricultural or religious purposes. Factors like a property’s size, age, and the type of construction used also determine the overall assessed value.
Rocket Mortgage® can provide a more accurate rate estimate if they know what kind of property you’re interested in. But when it comes to appraisals and assessed values, an official valuation can give you a definitive number. It provides a sense of how much you could make from the sale of your property.
An appraisal contingency can give home buyers peace of mind about the purchase price of a home. After doing this research, and weighing all of these factors, the appraiser will render an estimate on what they believe to be the fair market value of your property. Depending on the appraiser, the type of appraisal, or the home itself, an appraisal can take anywhere from a few minutes to several hours. The appraiser then uses the information gathered from other homes in the vicinity to reasonably estimate the home’s value. For many homeowners, differentiating between an appraisal vs. assessment can be challenging. While the assessed value and appraised value are two different things, there can be some overlap between the two.