Many people think appraisals and assessments are the same thing or at least that they should be for the same amount. The truth is they can vary greatly. Lets look at each of them.
Appraisals
An appraisal is an estimate of market value. An appraiser can use many methods for coming up with this estimate. For income producing property, the appraiser may capitalize the value of the income stream. (It would take x dollars of capital invested at a y rate of return to produce an income equal to the rental income generated by this property.) For other properties, an appraiser may use replacement value. (It would cost x dollars to build this structure if it were being built today.)
Appraisers usually use comparable sales when evaluating the market value of a home. They look at nearby properties with similar characteristics, which have sold in the recent past to see at what price they sold. They typically give the most weight to the property they deem to be most like the property they are appraising.
Buyers and sellers generally encounter appraisals when the buyers lender has an appraiser make an evaluation of the market value of the property being sold. The...
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