Tax assessors, home appraisers and real estate brokers all have valued our home differently. We were appraised for $350,000 last year, which was $110,000 lower than the assessed value for the same period. We’re wondering how a “true market” value can be determined fairly when the players use different rules. Is there a designated agency or government official to contact regarding this discrepancy?
Here’s a quick rundown of the estimates you can receive for your property value:
• Appraisers provide an independent estimate of fair market value. For residential property, that value is largely determined by the comps (or comparable properties) used in the appraisal. If you get two appraisals, you will likely get two different sets of comps and therefore differing valuations. Appraisers receive a fixed fee for their service, regardless of the value they determine.
• Real estate brokers look at recent past sales, typically from local MLS systems. They offer a "broker price opinion" or "Comparative Market Analysis" (CMA). These are not appraisals, but rather an effort to establish the sale or purchase price for a given property as the representative of a buyer or seller. Again, differing comps will produce differing values.
• Assessments are efforts by local governments to determine the fair market value of a property. That valuation, multiplied by the tax rate, produces your property tax bill.
While appraisals and CMAs rely on the latest market sales, that may not match up with assessments. In some jurisdictions, assessments are only updated every three years. Thus, it is possible to get an assessment that lags behind the market – whether the market is going up or down.
The result is that assessments, CMAs and appraisals are all likely to vary. There is no governmental agency to sort out which is better or worse. You're going to get different results depending on who you ask and when. It's not a system failure, it's just the result of different approaches to a complex question.
If you see big discrepancies in prices, point them out to the person who is estimating your property value – that is, if they're not in your favor.
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