Assessed vs appraised vs fair market value?

06-26-2005, 07:47 AM

OK, I'm sure someone has asked this one before. What are the general
differences between the

assessed value
appraised value and
fair market value

For a single family, residential house?

My real estate friend says there's no such thing as "fair market
value" since it's too subjective. He says fair market value is
usually tax assessed value because tax assessed value is established
by a municipality like a town or a city.

He also says that fair market value is the average price that's been
paid in the past 6 to 12 months for a house of similar specifications
and location.

So if fair market value and tax assessed value are similar, then why
is it necessary to have a property appraised to get it's appraisal
value?

How much different is appraised value versus fair market value?

Confused

06-26-2005, 07:47 AM

George W <dmrg@aaahawk.com> wrote in message
news:f76ec1f.0309101602.98f834e@posting.google.com ...
> OK, I'm sure someone has asked this one before. What are the general
> differences between the
>
> assessed value

For property tax assessment. Determined by your local tax assessor. Has no
relation to market value except for immediately after a transfer in states
with laws like California.

> appraised value and

Determined by a certified appraiser. Usually for securing a loan. There are
different methods for making this determination but for a house, it's almost
always based on recent comparable sales.

> fair market value

Whatever someone is willing to give you for the house in a non-distressed
sale and assuming the buyer is reasonably informed.

> For a single family, residential house?
>
> My real estate friend says there's no such thing as "fair market
> value" since it's too subjective. He says fair market value is
> usually tax assessed value because tax assessed value is established
> by a municipality like a town or a city.

He's wrong.

It is subjective, however, if a deal is struck, the seller is not in
distress, the buyer is informed, AND there is no collusion, the concept of
"meeting of the minds" has determined the fair value.

In virtually all cases, assessed value market value has no real link to
market value.

> He also says that fair market value is the average price that's been
> paid in the past 6 to 12 months for a house of similar specifications
> and location.

I thought he said there was no such thing.

> So if fair market value and tax assessed value are similar, then why
> is it necessary to have a property appraised to get it's appraisal
> value?

They are not similar in raw dollars. Lenders require appraisals to assure
them that the property is indeed capable of supporting the loan should there
be a default. This protects the lender from some forms of fraud and
collusion -- the lender need to know the value of the collateral and
appraisals are almost always higher than assessed value. Here in CA,
appraisals are much higher than assesed value for any home that sold over a
year ago.

For example, say your home is worth $200K. We make a deal where I buy your
house for $1 mil and you carry a $200K 2nd to cover the DP. The loan comes
through, I split the proceed with you and we both walk away. Appraisals keep
this from happening.

> How much different is appraised value versus fair market value?

It varies from state to state and jurisdiction to jurisdiction. Basically,
never rely on assessed value for anything. It's just the tool gov't uses to
come up with your tax bill. Since it's usually lower than market value, be
happy.

Many people have learned this hte hard way when dealing with a catastrophy
and their insurance. If the coverage is tied to assessed value, you will get
screwed -- get insurance that provides replacement costs.

legal Forum · 07-09-2009, 01:09 PM

In California, the tax collector may not change the assessed value of a residential property until the property is transferred. This is a protection known as Proposition 13 protection, named for a public referendum that initiated the law. However, if the market value should fall below the assessed value the homeowner may petition the tax collector to lower the assessed value.

Petitioning the value is really a simple process. There is usually a certain time during the year where the appraisal district will hear your petition and render a decision.

06-26-2005, 07:47 AM	#1
George W Posts: n/a	Assessed vs appraised vs fair market value? OK, I'm sure someone has asked this one before. What are the general differences between the assessed value appraised value and fair market value For a single family, residential house? My real estate friend says there's no such thing as "fair market value" since it's too subjective. He says fair market value is usually tax assessed value because tax assessed value is established by a municipality like a town or a city. He also says that fair market value is the average price that's been paid in the past 6 to 12 months for a house of similar specifications and location. So if fair market value and tax assessed value are similar, then why is it necessary to have a property appraised to get it's appraisal value? How much different is appraised value versus fair market value? Confused

06-26-2005, 07:47 AM	#2
JD Posts: n/a	Re: Assessed vs appraised vs fair market value? George W <dmrg@aaahawk.com> wrote in message news:f76ec1f.0309101602.98f834e@posting.google.com ... > OK, I'm sure someone has asked this one before. What are the general > differences between the > > assessed value For property tax assessment. Determined by your local tax assessor. Has no relation to market value except for immediately after a transfer in states with laws like California. > appraised value and Determined by a certified appraiser. Usually for securing a loan. There are different methods for making this determination but for a house, it's almost always based on recent comparable sales. > fair market value Whatever someone is willing to give you for the house in a non-distressed sale and assuming the buyer is reasonably informed. > For a single family, residential house? > > My real estate friend says there's no such thing as "fair market > value" since it's too subjective. He says fair market value is > usually tax assessed value because tax assessed value is established > by a municipality like a town or a city. He's wrong. It is subjective, however, if a deal is struck, the seller is not in distress, the buyer is informed, AND there is no collusion, the concept of "meeting of the minds" has determined the fair value. In virtually all cases, assessed value market value has no real link to market value. > He also says that fair market value is the average price that's been > paid in the past 6 to 12 months for a house of similar specifications > and location. I thought he said there was no such thing. > So if fair market value and tax assessed value are similar, then why > is it necessary to have a property appraised to get it's appraisal > value? They are not similar in raw dollars. Lenders require appraisals to assure them that the property is indeed capable of supporting the loan should there be a default. This protects the lender from some forms of fraud and collusion -- the lender need to know the value of the collateral and appraisals are almost always higher than assessed value. Here in CA, appraisals are much higher than assesed value for any home that sold over a year ago. For example, say your home is worth $200K. We make a deal where I buy your house for $1 mil and you carry a $200K 2nd to cover the DP. The loan comes through, I split the proceed with you and we both walk away. Appraisals keep this from happening. > How much different is appraised value versus fair market value? It varies from state to state and jurisdiction to jurisdiction. Basically, never rely on assessed value for anything. It's just the tool gov't uses to come up with your tax bill. Since it's usually lower than market value, be happy. Many people have learned this hte hard way when dealing with a catastrophy and their insurance. If the coverage is tied to assessed value, you will get screwed -- get insurance that provides replacement costs.

07-09-2009, 01:09 PM	#3
legal Forum Junior Member Join Date: Jul 2009 Location: United States Posts: 0	Assessed vs appraised vs fair market value? In California, the tax collector may not change the assessed value of a residential property until the property is transferred. This is a protection known as Proposition 13 protection, named for a public referendum that initiated the law. However, if the market value should fall below the assessed value the homeowner may petition the tax collector to lower the assessed value. Petitioning the value is really a simple process. There is usually a certain time during the year where the appraisal district will hear your petition and render a decision.


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