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>ASSESSMENT/APPRAISAL

What's the difference? Is it important?

Lots of people-- buyers and sellers--confuse assessments and appraisals. Here are the differences between the two and how each affects a real estate transaction.

Assessments are for real estate taxation. Every 4th year, someone drives by or observes the property and puts a dollar value on it. Because he/she must complete many properties daily, the inspection is not in-depth! A computer then assigns an annual increase. Lenders use this figure to determine a portion of your monthly mortgage payment. Do not confuse this figure with market value!!

Appraisalsdetermine market value. A licensed appraiser inspects inside and out, takes measurements, notes the number and kinds of rooms, location, property condition and more. He/she then compares the property with others sold within the last six months. Through comparison, he determines the market value relative to the others. It is a snapshot of value, good for about six months... property values may go up or down fairly quickly. All finance firms require an appraisal to justify the amount they are lending... and here is an important point:

Government guaranteed loans (FHA, VA) require that the property must appraise at least the selling price. Other loans require that the property must appraise for at least the amount financed... in other words, if you put 20% down, the appraisal may come in 20% lower that what you paid for it. That is NOT in buyer's best interest... so

>Good buyer agents put a clause in the purchase contract
which says property must appraise for at least sales price!

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