any people think home. They look at nearby
appraisals and assessments properties with similar
are the same thing or at characteristics, which have sold
least that they should be for the in the recent past to see at what
same amount. The truth is they price they sold. They typically
can vary greatly. Let's look at give the most weight to the
each of them. property they deem to be most
like the property they are
Appraisals appraising.
An appraisal is an estimate of Buyers and sellers generally
market value. An appraiser can encounter appraisals when the
use many methods for coming up buyer's lender has an appraiser
with this estimate. For income make an evaluation of the market
producing property, the appraiser value of the property being sold.
may capitalize the value of the The lender wants to be sure of
income stream. (It would take "x" the value of the collateral for
dollars of capital invested at a the loan. An interesting feature
"y" rate of return to produce an that comes into play in this
income equal to the rental income situation is that one indication
generated by this property.) For of value is at what price two
other properties, an appraiser unrelated parties will agree to
may use "replacement value." (It buy and sell the same property.
would cost "x" dollars to build In other words, what is the
this structure if it were being contract price the seller and
built today.) buyer of this property agreed on
(if they are not relatives).
Appraisers usually use
"comparable sales" when Assessments
evaluating the market value of a
An assessment is the value your take me up on my offer. Our
local government puts on your property sold at the listed price
property for the purpose of months later. We had paid six
taxing it. How this value is months' taxes on the property at
derived varies from jurisdiction a higher than market value.
to jurisdiction. Some communities
say the value is the same as On another occasion I helped some
market value. Some say the value elderly people sell a farm they'd
is a percentage of market value. lived in all their adult lives.
Some appear to actually do what The farm sold for a price a great
they say they do, and some do deal higher than the value at
not. which it had been assessed.
I was once a partner in an I believe the two examples are
investment property that we were fairly typical. Many
offering for sale at the time the jurisdictions will "puff up"
county re-assessed it. Imagine my assessments for businesses and
annoyance when the assessment investors and "low ball"
came in at one hundred and forty assessments for people who have
percent of the offer price. We lived in their homes for a long
weren't dummies. The partners time. Sometimes there are
were real estate professionals. I formulas for doing this. "Land
appealed the re-assessment, but use" is one such concept, i.e.,
my appeal was turned down. I the property is taxed at its
offered to sell the property at value as a farm and the fact that
the assessed price to the it is ripe for dense residential
appraiser the county had hired to and commercial development is
handle the appeals when he was ignored or deferred. Sometimes
telling me why he could not there are no formulas. It is just
reduce our assessment. He did not done.
figure out market value. They may
For these reasons, it is usually be the same. They may be vastly
not a good idea to put too much different.
credence in the assessed value of
a property when you are trying to
About the Author:
Raynor James is with http://www.fsboamerica.org - FSBO homes for sale by owner. Visit our "sell my home" page at http://www.fsboamerica.org/seller.cfm to sell your own home yourself with a free 1 month listing.
Source: www.isnare.com
