Appraised vs. Assessed

Many people as they begin to look at homes at think of their future in a home the question of value begins to creep into the equation. Of course, nobody wants to buy a home that is isn't worth what they are going to pay for it! But who determines how much a home is worth? The homeowner? The Realtor? The bank? The government? WHO???

In the USA long ago our founding fathers wanted to create a school system by which all would have the opportunity for education. The way by which this is accomplished is mainly by property taxes. Property taxes are individually calculated based on what the local county government determines the property to be worth called an "assessed value". This value will change when there are improvements to a property and periodically when the local government decides to "re-assess" properties located within their municipality.

Now we arrive to the difference between an appraised value and the assessed value of a property. The appraised value of a property is come to using various different mathematical and market based methods, which are weighed and used according to the knowledge of a licensed appraiser. An appraised value of a home is based upon several different factors including but not limited to: location, age, square footage, condition of home and comparable sales prices. As was just said, the assessed value is changed either periodically or when major improvements are made. However, your property's appraised value is constantly changing! The current housing market we are currently in is a prime example of this. Especially on the coast's of our country, homes that were purchased for $800K or $900K a matter of 2-5 years ago are now selling for much, much less, even $500K or $600K is some instances. However, there was no major improvement or "destruction" of the property done.

The reliability of an assessed value is very shaky as properties do not simply increase and/or decrease in value every few years. Also, what if a major improvement was in fact performed on a property without the local government knowing about? Does your property retain the same value as before the improvement? Keep in mind that as your local government (assessor) determines the "assessed value" of your home they usually do not enter the property to assess the interior condition of the home which plays a very large role in determining the real value.