Let's talk Appraisals!

Updated: Sep 27, 2021

Appraisals are very in-depth and there are multiple values that come with a subject property. How do we know the difference and what do they mean?

Market Value, Appraised Value and Assessed Tax Value?

A lot of people tend to get these three definitions mixed up and they all are slightly different. Each of these terms are associated with real estate transactions and/or real property. They even sound very similar but all carry different meaning.

Market Value = Consumer driven. Basically it is a price agreed upon by a buyer & a seller for a property. Real estate agents assist in determining market value through CMA's (Comparative Market Analysis). One thing to remember is Market Value is not an official appraisal. This number is determined off of sold houses that are similar to the subject property to include property features and overall condition.

Appraisal Value = Objective. 3rd party assessment of a property's Market Value. This is performed by a professional and licensed Appraiser. Appraisers are hired/contracted by the buyer's lender. They truly work for the bank. Appraisers ensure that the buyer is not borrowing more than the home is worth. This number sets the value that may be mortgaged for the property. Similar to a CMA process where both the Realtor & Appraiser go into the subject property to determine a value.

Assessed Tax Value = A figure local government uses to determine property taxes. No appraiser or Realtor is involved in this process. County assessors do not typically do a walk through on the property. Primarily based off of homes square footage, bedrooms, bathrooms, outstanding buildings, improvements and lot sizes...

This is the assessment you want to be the least in value, as your property taxes could go up if your assessed tax value goes up.

Appraiser Standards & Requirements...

Appraisers are provided information on the transaction prior to viewing the subject home. A major contribution to what an appraiser is looking for is determined by the contract loan type. Is this a Conventional Loan, FHA Loan or a VA Loan? (there are other options as well. With FHA and VA Loans Appraisers look at 4 major features when they do a walk through of the subject property. These four things are foundation condition, roof condition, negative drainage & water issues & chipping and peeling paint.

Peeling and chipping paint is a huge deal when looking to sell your home. Not only do appraisers look at the subject property but they also include outbuildings, sheds and fences. It is key to make sure you are either prepared to address paint issues or the property may not be able to close. When fixing up these issues one thing to remember is that there can not be any paint left on the ground. Make sure to use a tarp for easy clean up as it will be called out as a safety concern if an appraiser sees paint chips on the ground.

Home Improvements...What Matters?

When making home or property improvements it is vital to discuss those changes with a Realtor prior to starting the project. Now, no one is required to do anything, but if you are worried about doing work that may not increase your property value then it is never frowned upon to get a second opinion. Some home owners make improvements thinking it will get them a higher offer. While this may be true, an Appraiser may not agree and result in not giving the value desired. For example, egress windows. The appraisal panel discussed that home owners may value egress windows and see it as an improvement deserving of value, however appraisers do not give direct value increase based on egress windows being present. Be wise on those improvements and intentional when getting seller ready.


All information provided above is subject to change and based on information provided by a Montana Appraisal Panel.

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