The value of a property is important to different interested parties for different reasons. As a potential buyer or homeowner, it's critical to understand what the values mean and how they're derived. The estimated market value and the taxable market value are two different estimates of property value. They are used for different purposes, and in some cases aren't even similar to one another.
Estimated Market Value
The estimated market value of a home is the price that the property would be expected to sell for on the open real estate market. It is also called the fair market value or appraised value. Real estate agents use this value to set a price for a property. It is also used by mortgage lenders during the loan approval process. The lender must verify the value of the property to ensure the requested loan is in tune with the property's value.
A property appraisal is conducted to determine the estimated market value of a home. Licensed appraisers complete the appraisal process by visiting the home and walking through it. The appraiser documents the physical features of the property, such as the type of structure, building materials, size, number of rooms and any upgrades. Based on this information, the appraiser estimates the value, then compares it to other similar properties in the area. These properties are known as "comps." The appraiser may adjust the value based on the comps.
Taxable Market Value
Local governments throughout the United States impose taxes on the owners of real property. Tax rates vary dramatically between jurisdictions. The taxable market value of a property is used to calculate the overall property tax bill. The taxable market value is only important to the tax collector and the property owner. It often differs from the estimated market value.
The taxable market value is not determined through an appraisal. A tax assessment is the method used to determine the taxable value. The assessment process is determined based on the jurisdiction's rules, but all of the properties within one jurisdiction must be assessed in the same manner. A tax assessment is generally not as in-depth as an appraisal. The assessor typically does not physically enter the property, although he might drive through the neighborhood. The tax value is reassessed from time to time, which causes the property taxes to fluctuate.
- Stearns County Minnesota: Understanding Your Assessment
- 3:16 Team Realty: Myths About Tax Assessment vs. Property Values
- Tax Policy Center: State and Local Tax Policy: How Do Property Taxes Work?
- Buyer's Choice Realty: Appraisal vs. Assessment
- Independent Appraisal Corporation: Factors Considered in a Home Appraisal — The Most Important Ones
- Tax Foundation: Prop 13 in California, 35 Years Later
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