Many homeowners and buyers in the Phoenix area are under the common misconception that an appraisal and an assessment are the same thing. The fact is that they are two very different documents and are used for very different purposes. Understanding each document will give you a better idea of its use and why each document is needed.
An appraisal is the estimated value of your home in the current market. It is derived using the market value of comparable sales in your area. In short, it is how your home stacks up to the homes that have sold recently or are on the market in your area. Factors such as the age of your home, its square footage, the condition of the home and the features will be compared to other homes in the area to place a dollar value on your home. An appraisal document is normally used when a buyer’s lender is verifying the value of a home to be certain that it is suitable collateral for the loan amount being requested. On more rare occasions an appraisal can be used by either a buyer or a seller as a reasonable explanation for either the price being asked for a house or for the amount being offered for a house.
An assessment is the value that your local government assigns to your home for tax purposes. The value formula of an assessment varies depending on the municipality. Some areas state that the assessment is the same as the market value of a home and others claim to tax on only a certain percentage of the current market value. Many times properties are only assessed when sold or once every three to five years. For the other years, the municipality will simply recalculate the assessment value using the most recent assessment number and a multiplier to account for increase in value across the area.
In short, an appraisal is a document that states the actual current market value of your property and an assessment states the value that is being used to calculate your property taxes. In some cases the values are the same or very close but in many cases they are not. Using the appropriate document to determine the market value of your Phoenix home or the property tax on your home is very important.