When you're buying or selling a property, one term that you're likely to hear quite often is "appraised value." But what exactly does it mean? Simply put, appraised value is the estimated worth of a property based on assumptions they're based on several factors such as location, age, condition and size. It's an official financial decision that is made by a professional appraiser who has undergone extensive training and certification.
Understanding the concept of appraised value is important because it can affect many aspects of your real estate transaction. For instance, if you're buying a property and the appraised value is lower than expected, your lender might not be willing to lend you as much money as you need. On the other hand, if the appraised value is higher than expected, this may increase appraised equity and give you more bargaining power during negotiations. Additionally, knowing the appraised value of a property can also help you make informed decisions about home improvements or other investments in the property. Overall, having a good idea of what appraised value means can be incredibly useful when making decisions related to real estate.
Definition and Example of Appraised Value
What is appraised value? Appraised value refers to a professional opinion on the worth of an item, property, or asset. Appraised values are completed prior to the lender issuing financing and can affect the market value of a property.
For example, when Melinda Wilner, Chief Operating Officer at United Wholesale Mortgage in Detroit, MI told email appraisers to provide objective and unbiased opinions for buyers' mortgage lenders, she was emphasizing the importance of accurate appraised values. The completed appraisal helps determine the loan amount and affects whether or not it will be approved. It's important to understand that an appraised value isn't just a random number pulled out of thin air; it's a professional opinion based on careful analysis and consideration of multiple factors.
Note that appraised value is an important factor when it comes to home appraisals. A licensed appraiser researches comparable listings and recent home sales in the area, examines current market trends, and physically inspects the property features including floor plans upgrades and energy-efficient features, to determine the value of a single-family home. Knowing this value can help homeowners understand how much they can expect to sell their home for or how much they need to make mortgage payments.
Exploring the Concept of a Home's Assessed Value
When it comes to owning a home, there are many factors that can affect its value. One of the most important is its assessed value, which is determined by local government officials. This tax assessment typically involves a visit from an assessor, who assigns a value to the property based on recent sale prices of similar homes in the area.
The city assesses property taxes based on this assessed value, charging tax owners accordingly. However, it's important to note that not all owner-occupied homes are assessed fairly. In some cases, the property assessment may be too high or too low, resulting in either overpayment or underpayment of property taxes.
If you suspect that your home unfairly being charged tax due to an inaccurate assessment, you can contact your local assessor's office for help. They may be able to review your case and make changes if necessary. Understanding the concept of a home's assessed value is essential for all homeowners as it plays a critical role in determining their annual property taxes.
Deciding Market Value: Advice For Sellers
As a potential home seller, it's important to understand how to determine fair market value for your property. Appraised value is one way to assess your home's worth, but it's not the only factor to consider when pricing your property.
Appraised value is an estimate of a property's worth based on recent sales of similar homes in the area, as well as the condition and features of the property. However, it doesn't take into account factors such as current market conditions, competition from other properties for sale, or any unique features that may add value to your home. To determine fair market value, it's important to work with a real estate agent who has experience in your local market and can provide a comparative market analysis (CMA) that takes all of these factors into account.
What Appraisers Take into Account When Evaluating Property
When it comes to the home appraisal process, there are a few key factors that appraisers take into account when evaluating property. For starters, they leave valuations up to the professionals and don't rely solely on the real estate agent's opinion. Instead, they use an appraiser checklist that includes reference factors like square footage, interior design unique features, helpful amenities, and landscaping attractive to help determine appraised values.
Homes appraised by expert evaluators will also consider the condition of the property. If a house is older than 30 years of age or has suffered significant wear and tear over time, this can negatively impact its evaluation. On the other hand, well-kept grounds with updated appliances and modern renovations can increase a home's equity value significantly.
Overall, an evaluation from home appraisers is crucial for homeowners looking to refinance their mortgage or cash-out refinance for improvements to their property. By understanding what goes into an appraisal, you can be more prepared for what to expect when it comes time for your own evaluation.
Can You Increase Appraised Value?
If you're curious about how to increase your property's appraised value, there are a few things that you can do. The first step is to physically change and improve the home with a home renovation project. This could involve adding rooms or updating pre-existing space to make it more modern and appealing.
Another way to increase the appraised value of your property is by providing comps, which are comparable properties in the area that have recently sold for higher prices. This dollar-per-dollar comparison will help the appraiser understand the current market trends in your area and determine a fair value for your property.
It's important to note, however, that not all renovations are created equal. While an extra bathroom or updated kitchen can add significant value, some upgrades may not provide as much return on investment as others. Wilner warns against over-improving your property beyond what is considered standard for the neighborhood, as this can actually decrease its overall value.
Frequently Asked Questions
What is the difference between appraisal value and market value?
Appraisal value is the estimated worth of a property by a licensed appraiser, while market value is the price at which a property can be sold based on current market conditions. Market value fluctuates with supply and demand, while appraisal value remains constant until a new appraisal is done.
What factors influence the market value of a home?
The market value of a home is influenced by several factors, such as location, size, condition, amenities, and recent sales in the area.
How do buyers determine whether to wait for the appraised value or accept the current market value?
Buyers should consider their own financial situation and whether they can afford to pay the difference between the appraised value and the current market value. Waiting for the appraised value may result in a more accurate valuation, but it also carries the risk of losing out on the property if another buyer makes an offer.
How is the market valuation of a property more subjective than an appraisal?
Market valuation of a property is more subjective than an appraisal because it relies on the opinions and perceptions of buyers and sellers, whereas an appraisal is based on objective data such as the property's condition, location and comparable sales.
Are property taxes based on assessed value or purchased price?
Property taxes are based on assessed value, which is determined by the local government's appraisal of the property's worth. The purchased price of the property may be a factor in determining its assessed value, but it is not the sole determinant.