Assessment, appraisal... what is the difference?

What is the difference between and an assessment and an appraisal? The assessed value on the house is $200,000 and the seller is asking $225,000. Is it only worth $200,000? Can you get a loan for $225,000 if it is only assessed at $200,000? And why do you need to get an appraisal if the house has already been assessed? Good questions!

While both an appraisal and an assessment place value on a home, they are used for different purposes. I don't know all the legal specifications and the technical terms for describing each one, but I do understand the practical implications of each.

An assessed value of a home impacts the tax amount that homeowner will pay. Each individual home is not assessed based on its' unique value. Rather, neighborhoods and like houses are grouped together and run through a formula to determine a price range. Sales prices of homes are factored into the formula, however, the sales price of the home will not necessarily impact that individual home's assessed value. Because the assessed value is determined by a formula, a change in one home price may not be significant enough to impact individual homes.

Still confused about assessed value? I spent a good amount of time in the county assessors office trying to understand my own home's assessed value. It was a confusing meeting but I learned that the lower the assessed value the lower my taxes! So I was just fine if they didn't give me credit for granite counter tops or if they didn't add value for my landscaping.

The appraisal, on the other hand, places value on everything! An appraiser should come into the home and put a dollar figure on the structure of the home, the lot location, the condition of the property, upgrades in home, and all amenities. They are attempting to determine true market value - or what a buyer will pay for a home in today's market. The appraisal is used most often for financing (or refinancing) a home and the investor funding a mortgage wants to know what his/her investment is worth. So the higher the appraised value, the more you can borrow.

While the assessed value impacts tax payments, the appraisal has direct impact on how much buyers can borrow against the house. The numbers can be drastically different. An assessment is only as good as the county's system. And although an appraisal is more property specific and should be more accurate, it is also only as good as the appraiser. Regardless, they are used for different purposes and shouldn't be confused.

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Help me find a good deal on real estate.

You want a good deal. You know it is a buyer's market and you want in on the action. Who needs high priced, move in ready, immaculate home when down the street is a discounted, bank owned home? Or a short sale home listed below market price? And you know there is a foreclosed home just two streets over that is empty and has been for months. How can you buy it for a good price?

These are all valid points. But if it were that easy to buy a home at such a cheap price, then everyone would be doing it. However, if you are interested in a fixer-upper, have some cash, and lots of patience, then there may be a good deal out there for you. If you are serious about buying a distressed property, there are a lot of resources available. Below are a few websites that may aide you in your search.

• http://portal.hud.gov/portal/page/portal/HUD/states/indiana The US Department of Housing and Urban Development website has a wealth of information, including a listing of homes for sale. A HUD home is a 1-to-4 unit residential property acquired by HUD as a result of a foreclosure action on an FHA-insured mortgage. HUD becomes the property owner and offers it for sale to recover the loss on the foreclosure claim. New homes are listed every week. Buyers can bid on property, but HUD requires that a representation by a licensed Real Estate Professional.

• http://www.homepath.com Home Path Homes are foreclosed homes where Fannie Mae was the investor. These properties are listed with a real estate broker and on the BLC for everyone to see. However, if you go the Home Path website, you will find more information about Fannie Mae homes and see a complete listing of Fannie Mae homes for sale.

• http://www.hamiltoncounty.in.gov/services.asp?id=2295 Local Sherriff Sale listings are posted on the County website. Homeowners have defaulted on their mortgages and these distressed homes are sold at public auction to satisfy a judgment. You must have cash (certified funds) at the time of the auction and purchases are not guaranteed to be free and clear of liens. So be prepared to do your homework before bidding on a home.
  

• Your Real Estate Professional Ask your agent to set up a search for you for bank owned, foreclosure, short sale properties. They have the ability to search for listing based on certain criteria and can automatically forward current listings as well as new listing to you on an ongoing basis. Don’t have an agent? Then I would be happy to help! Email me at jjaensson@callcarpenter.com or call me at 317-847-1973.