3 types of home valuation

Jose Maciel
Jose Maciel
Published on April 1, 2020

Whether it’s a car, garage sale items or you’re selling on websites such as Ebay, successfully selling “stuff” has one major requirement: you need to know how much it’s worth.

After all, price an item too high and it most likely won’t sell. Price it too low and you’ll lose money on the deal.

The same holds true for houses, but there is a lot more money involved and the stakes are far higher.

There are several different home evaluation models, depending on the purpose for which the value needs to be ascertained. Let’s take a look at these and the differences between them.

Your home’s assessed value

Homeowners can’t get around paying property taxes and they’re based on your home’s assessed value. Your county or other municipality official, most commonly known as the “assessor,” will come up with the number for this evaluation.

He or she will use many of the same resources as a professional appraiser, from public records to recent sales. After deducting any exemptions available to you, the assessor multiplies the value by the assessment rate for your municipality to come up with the tax value for your home.

You’ll notice that the assessor’s value is often quite different than your home’s actual market value. Again, this evaluation is for tax purposes only and does not express your home’s current market value.

The market value of a home

The market value of a piece of property is based on what a buyer is willing to pay and a seller will accept. It is reflected in the recent sales prices of similar homes, or “comps,” short for “comparable homes.”

Most home sellers rely on the skill and experience of their real estate agent to determine their home’s current market value. And, although they don’t call their determination an “appraisal,” real estate agents use many of the same valuation techniques as appraisers.

They will base their determination on the following, when comparing your home to the comps:

  • The size of the home
  • Age of the home
  • Condition of the home
  • Location of the home
  • Special features

Then, if the agent is familiar with your neighborhood, he or she will use any knowledge of recent home appraisals in the area to help narrow down a price for your home.

This is what knowing market value does for homeowners: it helps them determine a competitive price for their homes.

A home’s appraised value

The appraised value of a home is that which is determined by a professional home appraiser. Typically hired by a buyer’s lender, this is the value determination that can make or break a home sale.

The appraiser will visit the home, taking measurements and notes. Back at the office, she will use many of the same techniques that real estate agents use, with the addition of public record information and other assistance.

Whether or not your agent’s evaluation matches that of the appraiser depends largely on current market conditions. In a recovering market, such that we saw after the recession ended, it may be challenging to pinpoint value.

When purchasing a home, it’s a smart move to look at a home’s property tax burden. But, for sellers, this type of value means little. It’s the market value and the appraised value that are important.

Still have questions? Fee free to reach out to us.

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