Property Tax Assessment vs. Home Appraisal

September 2, 2014 | By: TaxCure Staff

property-taxes-vs-assessmentI’m in the process of selling my house. We’re under contract, but everything doesn’t go through for a few weeks yet. If you’ve ever sold a house, you know that it can be a long process. As part of the process, you often need to have your home appraised.

When my real estate agent notified me of my home’s impending appraisal, I was a little nervous. After all, the property tax assessment had just arrived, and the county values my home at about $5,000 less than the sale price of the home. If the appraisal was in line with that number, our sale could have been blown.

The good news (if you’re trying to sell your home, of course) is that your property tax assessment isn’t the same thing as an appraisal. In many cases, your property tax assessment is likely to be lower than your appraisal.

Ways Property Taxes are Assessed

Each authority collecting property taxes assesses them in its own way. This means that you might need to contact your local assessor’s office to find out how, exactly, your property taxes are figured. Here are some of the ways that your taxes might be assessed:

  • Local market conditions: Your home’s value for tax purposes might be determined by the current real estate market. Some of the items considered might be sales of similar homes in the area, cost to replace the home, size of the lot, and size of the home. 
  • Cost to replace: In some cases you might be taxed based on how much it would cost to replace the home, depending on the costs of materials. 
  • Income: Another method to assess your property for taxes is to figure out how much you could make if you rented the home out for income, then base the tax on that. 

Of course, some authorities might use other methods, or they might use a combination of methods. If you are unsure, the best course of action is to contact your tax authority’s assessor.

However, even when you know how property taxes are assessed, it doesn’t mean that you will be able to accurately gauge a home’s appraisal value based on the property tax assessment. In my case, the house appraised at about $7,000 more than the county’s assessment.
And I’m not complaining about that, since it has meant lower taxes over the years, and it means that my home’s sale will likely go through without a hitch. Part of the reason behind the fact that many county assessments come in lower than appraisals is due to the general nature of the county assessment.

A county assessor might come and look at the property, but usually s/he doesn’t enter the home. On the other hand, an appraiser comes through the home. S/he can see the upgrades inside the house and might take into account items like landscaping and a sprinkler system. If you’ve made some upgrades to your home, that might factor into the “value” of your home in terms of a sale, in a specific way that might not be considered by a tax authority’s assessor. So, if you are dismayed by the low assessment that comes through with your property tax assessment, take heart, it might be that your appraisal will come back a few thousand dollars higher, provided your home is a cut above the “average.”