A professional real estate appraiser assigns an appraised value to a property. Rather, the market value of a property is decided by buyers, who value real estate based on what they believe the price of a property should be and, more importantly, what they are willing to pay for it. In theory, fair market value and assessed value should be approximately the same, but in practice this is not always the case. This is because the appraised value is an estimate determined by an appraisal, while market value refers to the value for which the house would sell on the open market.
Evaluating the real value of the property is more complicated than you might think. While real estate agents can give you a rough estimate, the valuation of a property doesn't always match the valuation report. The price price may be thousands of dollars higher than the final value of the property. After all, valuation is not the same thing as appraising a property.
Fair market value is mainly based on comparisons with other homes sold recently and reflects the current market. The appraised value is based on a thorough and personalized examination of your home by a licensed professional. Market value comes into play, but more importance is given to the features and conditions of your home. Learn more about the difference between fair market value and assessed value.
The property must be appraised by a qualified real estate agent who is familiar with the neighborhood or local area. Since fair market value is more useful to sellers and their sales agents, it is likely to be higher than the assessed value, as long as the market supports it. Licensed appraisers must complete 150 hours of state-regulated education, 1000 hours of fieldwork, and ongoing training after obtaining the license (hours may vary by state and credentials). Curb appeal, recent home improvements, and current market trends can also influence your valuation.
Appraisals take place several weeks after the contract has been fully executed, so this usually puts the buyer of the property in a peculiar situation. The buyer's lender uses the value appraised during the escrow to ensure that the home is actually worth the amount of the loan they are taking out. And fair market value is more of a tool for sellers (and their sales agents), while assessed value is more of a tool for the buyer and his lender. In these circumstances, the lender selects the appraiser and the buyer pays the appraisal fee as part of the closing costs.
So, what negatively affects the valuation of a home? Well, some of the most obvious factors include the location, the age of the house, and the materials used to build the house. Appraisers usually work for valuation management companies, or AMC, and operate in a highly regulated industry. The appraised value helps the buyer determine if the offer made for the home is in line with its target value. However, to provide some clarity, let's look at what market value, assessed value and assessed value are.