It's easy to be confused about the different valuations being used in the home buying and selling process, but knowing a home's value or worth in the real estate market will help you get a fair price.
There are generally three ways to determine the value of a home: through a Comparative Market Analysis, a professional appraisal or an assessed valuation. A Comparative Market Analysis (CMA), can determine a reasonable listing price for your home. A CMA considers a number of factors including the home's size, age, location and amenities. The CMA also takes into account the list prices of properties that are currently for sale, have recently sold or expired in your neighborhood.
An appraiser (usually used by lenders) determines the market value of your home by looking at the supply and demand of like properties in the area, comparing your property with others that have recently sold, determining the amount of money it would take to replace your home at current material and labor costs. Lenders frequently require a professional appraisal upon which to base your loan amount.
Local governments also perform independent appraisals to determine your home's assessed value, available on public record, so that your property is taxed fairly.
When comparing the CMA and the appraised values, don't be surprised if they do not match. There are a number of reasons that these differences occur.
The "market value" determined by the appraisal can be different from the "market price" determined through a CMA. In essence, the appraisal amount reflects the cost of replacing your home. But the goal of the CMA is to determine a price that someone will pay for your home. The sale price can be much different from the appraisal value.
Also, the real estate market is constantly changing. A home that was worth $100,000 last year may be worth $105,000 this year and possibly more next year. Meanwhile, all city and county property assessments are assigned an effective date, valid for that particular point in time. The more time that has passed since the appraisal, the greater the possibility for disparity in the values. For example, some governments appraise properties annually; others appraise properties once every four years.
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