NewburyportNews.com, Newburyport, MA

Business

January 11, 2011

What's your home worth? Terms can be confusing

When discussing real estate values, I often find that I need to explain the subtle differences in terminology. Many people confuse and frequently interchange the terms market, appraisal, and assessed value, but the differences make for a black and white comparison.

Market value is simply the most probable price a particular property should sell for in a competitive and open market with all conditions for that market being met by the property, with the buyer and seller acting on their own accord. In determining value, an analysis is performed, usually by a Realtor. The analysis includes looking at similar properties that have sold recently, as well as looking at similar properties currently on the market and those that were put on the market, but did not sell.

Appraisal value is defined as the opinion of a qualified appraiser, based on knowledge, experience and analysis of the property being appraised, usually for a sale. An appraisal is an unbiased value of the property and is typically ordered by a lender in order to confirm that the value of the property is in line with the value on the mortgage application.

Factors in determining value here are recent sales of similar properties, replacement cost and knowledge of the local marketplace. The main difference from market value is that an appraisal is based on historical data, without any concern of how the market may perform; whereas, the market value places an emphasis on future performance.

The assessed value of a home is the value determined by the town's assessor strictly for tax purposes and is used to create the town's tax revenue. This value is used by the municipality to determine the amount of tax that the property owner must pay. The assessed value is then multiplied by a tax rate to determine the actual tax. Towns use different rates and have a different baseline.

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