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