Military home sellers need to know the differences between assessed values and appraised values when planning to sell their home. It's common to confuse the two, since both affect the home’s value, but in different ways.
Simply stated, assessed values are all about how your local government taxes your property to earn income and provide community services, while appraised values are what mortgage lenders use as “insurance” before lending buyers money to purchase your home.
While they are different, both assessed and appraised values are important pieces to better understanding how to estimate your home's value.
By diving into more detail, you can understand how to prepare for your home sale and work with future homebuyers to negotiate the best deal. Karen Hall, owner and co-founder of Foxtrot Real Estate in Alexandria, Virginia, shares her expert insight and explains the differences between assessed and appraised values in the brief informational video below. She covers some of the most important questions to ask a real estate agent about this topic.
Think of your house’s assessed value as the way city and county governments measure how to tax your property, but it's not how much you could sell your house for in the future. Your local tax officials follow guidelines and laws that spell out how homes are assessed, and they incorporate your community’s tax rate details. Some jurisdictions send assessors to see the property, while others do not.
Assessors rely on multiple years of property data, home inspections, and sometimes comparative market analysis to complete their findings. Once finished, they calculate the property’s assessed value. Ultimately, local governments use these property taxes to fund schools, public safety, and other community services.
Although the assessed value doesn’t directly affect your home sale process, it is a consideration for your buyers. They’ll have to figure the property taxes into their home-buying budget. If your property taxes are inaccurately assessed too high, it could add another roadblock to your buying pool.
Appraised values directly affect a home sale because they’re used to determine your home’s actual value. After your property goes under contract, your buyer’s lender, including those offering a VA home loan, will request an appraisal to see what the home is worth in the current market so they don’t loan the buyer more than the property is worth.
The appraisal is part of the mortgage underwriting process, and it's far more in-depth than an assessment. The findings ultimately affect the mortgage amount and the sale price. Remember, the appraised value is insurance that the lender is making a good investment. It also helps buyers and sellers get a clear picture of the property’s value so they can negotiate the purchase price.
Highly trained and licensed appraisers usually spend a couple of days to a week completing the appraisal. It depends on how busy your market is and your location. If the appraiser is from a VA home loan or an FHA loan lender, they’ll have more criteria to check.
Before arriving, the appraiser takes a look at the property’s online data, but they will also consider the location, the house’s general condition, square footage (including the number of bedrooms and bathrooms), special features, and nearby comparable homes sold within 180 days.
Other conditions that affect the appraisal process:
If you’re planning a For Sale by Owner, consider hiring an appraiser as part of your pricing strategy. Do You Need an Appraiser for Your Home Sale? gives more information.
If the appraisal meets or exceeds your asking price, you’re in good shape, and everyone can move toward closing. However, there are options if your house appraises under the contract price:
Knowing why your house appraised low will help you decide how to proceed. If you're using the services of a real estate agent, they can be an important resource in this situation.
Scour the appraisal report for inaccuracies and compare the details to recently closed comparable homes. These are some of the criteria the appraiser researches, and they need accurate facts to reflect the true home valuation, especially in competitive markets.
Now that you’ve seen the differences between assessed and appraised values side by side, it’s simple to see how they fit into your home-selling plan. An assessed home valuation equals property taxes, while appraised values involve mortgage lenders and buyers.
MilitarybyOwner makes home selling easy to understand, whether you’re working with a real estate agent or planning on a For Sale By Owner. Download our free home-selling guide below.