How do banks appraise homes and how is that different than how the town appraises a property? THANKS!

Asked by Rita Vazquez-Torres, Hudson, MA Fri Nov 4, 2011

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Christopher Pagli’s answer
Christopher…, Agent, Tarrytown, NY
Mon Nov 7, 2011
Hi, There are three approaches to appraisal and the banks use the market approach. This means they look at recent comprable sales in the immdeiate area to justify the loan amount needed. Most bank appraisers will appraise the home for the value needed to fund the loan. They give the bank a range of value and the bank goes with the low end of the appraised value or purchase price, whichever is the less of the two. If the property doesn't appraise for the pric needed the buyter either puts up more cash, thus needing less of a loan or the seller lowers the price to meet the appraised value. The town doesn't visually inspect the homes, they go with recent recorded sales and determine an assessed market value.

Christopher Pagli
Licensed Associate Broker
Accredited Buyer Representative
GREEN Designated Agent
William Raveis Legends Realty Group
914.406.9023
1 vote
Richard Shap…, , Framingham, MA
Fri Nov 4, 2011
BEST ANSWER
Banks dont appraise homes. They hire appraisers who compare you home to recently sold homes. These comparable sales should be within the past 6 months and should be of similar style, age, and size to your home. If appraisers did what Ron suggests, then most people would be considered at 100% loan to value.

Assessments may be based on sales comparisons as well but town assessments generally are not as accurate to market value as an appraisal. There is no correlation between the two.
1 vote
Tim Page, , 99037
Mon Nov 7, 2011
First, each bank and each appraisal may differ by 5%. Now for your question. Assessed value is determined by the county or city in which your home is located. Many times, they will determine the value once per year. Many times they will put many homes into a "bucket" and find the value based on all of the other homes in your market area. Some of these homed may not be similar to your home. Sometimes, they will get more specific. Assessed values will usually follow market values appraised by an appraiser. That is if home values are increasing, the market value (value by the appraiser) will be more than the assessed value. When values are declining, market value will be less than the assessed value. The market value is much more accurate, but many times the assessed value and the market value will depend on the county. Some counties are spot on and some are way off.
0 votes
Tom and Joan…, Agent, Boston, MA
Mon Nov 7, 2011
Rita:

Appraisal is based on current market conditions of like kind properties sold in the last 3-6 months. The town assessed value is based on average square footage and yard size of homes that have sold over the past 1-3 years. No one had a problem with assessed values when the market was going up! It is only now that market value is lower than prior year values (assessed) that people have an issue. best
0 votes
Sally Grenier, Agent, Boulder, CO
Fri Nov 4, 2011
Different counties have different methods for ASSESSING a home's value. (as others have said, it's NOT an appraisal).

As a homeowner, and you disagree with your county's assessed value (feel it's valued too high and you're paying too much in taxes), then you can try to contest it. (Sometimes it works, sometimes it doesn't). But you need to know how they arrived at that figure to begin with and be able to provide back up information as to why their value is incorrect. Look on your county's website.

But as a buyer or seller, I wouldn't pay ANY attention to the assessed value. Have your REALTOR do a CMA.
0 votes
Kevin Vitali, Agent, Tewksbury, MA
Fri Nov 4, 2011
The purposes of each are totally different and don't really have any correlation.

A bank hires an appraiser to determine fair market value of a home. A price at which a buyer and seller agree on where both parties are well informed and it is an arms length transaction.

A town assesses a property for the purpose of equitably levying taxes. Meeting a budget is the priority of a tax assessment.

The criteria for determining each is also different.
0 votes
Annette Law…, Agent, Palm Harbor, FL
Fri Nov 4, 2011
The town appraises property for taxing purposes. Examine the explanation of tax appraisal on your tax authorities website. Make special note if the value is intended to include real estate professional fees.
The bank appraises to protect their investment. Placing requirements on appraiser that create lower appraisals is to the banks benefit.
Real estate agents calculate market value.

A recent market analysis revealed the following for a Palm Harbor Fl property.
Tax appraised value: $222,500
BofA appraisal: $352,000
Just market value: $410,000 (area discount 6%)

Using tax values to purchase homes is not a good strategy in Palm Harbor, FL
0 votes
Ron Thomas, Agent, Fresno, CA
Fri Nov 4, 2011
Banks Appraise the property to try to cover at least the amount of the LOAN.
They are not interested in the MAX amount that the place would sell for; they are interested in THIS deal.

The town does not APPRAISE the property; they do an ASSESSMENT, usually based on a percentage of the last Selling Price, to raise money for the Country for annual expenses and any outstanding Bonds.

One has no relationship to the other; and the Assessment certainly has nothing to do with the present VALUE of the Property.

Good luck and may God bless
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