In the world of real estate there are several different types of valuation that can be associated with a property. As a home owner it is important that you are aware of each type of valuation and know the difference between them.
Also known as “Tax Value,” this is the valuation of your property as provided by the County. This valuation is used to derive property tax. Out of the three types of valuation we are looking at in this article, this is the least accurate and by no means should be used to define how much a home can be sold for.
The local authority provides homeowners with an assessed value for their home once a year. If a home owner believes this valuation to be incorrect, they can challenge the valuation. In order to support challenge the owner can either have an appraisal performed on their property or get a Realtor to perform a CMA “comparable market analyses”. They can then send in this information or make a personal appearance at the hearing. Based on the information provided the County will decide if the properties assessed value needs to be adjusted.
The market value and appraised value are very similar, and are often confused. The market value is usually provided by a Realtor and is used to obtain a current market value based on recent sales. The Realtor obtains a market value for a property by performing a CMA (Comparative Market Analysis). This involves looking at recent sales of similar homes in the area and using this data to provide a value. This is often done in order to decide the listing price of a property, or to ensure that a home is fairly priced before a buyer offer is written.
While the market value can be performed by anyone, an appraisal must be completed by a licensed appraiser. While a homeowner can ask for an appraisal at any time, it is most commonly performed as part of the mortgage application process.
The mortgage company requests an appraisal to ensure that the home that is being purchased is worth what the buyer is offering. If the home does not appraise then the buyer can either walk away from the
contract without penalty (assume the appraisal deadline has not been passed), ask for a reduction in price from the seller, contest the appraisal or just stump up the extra in cash.
It is worth noting that the process used to obtain the appraised value is very similar to that used by the Realtor to obtain the market value.