Appraisal vs Assessment: What’s the Difference? | reAlpha Mortgage

Buying a home is a thrilling milestone, but the avalanche of jargon can be overwhelming. Two terms often confused are "appraisal" and "assessment." They sound similar, but they serve completely different purposes.

Heads up: Mistaking one for the other could cost you thousands. Don't worry, we’ve got you. In this guide, we’ll sort through the confusion, break down what each term means, and help you feel like a pro by the end. Appraisals protect your lender; assessments impact your taxes. Let's dive in.

• An appraisal determines a property's current market value, typically for lending purposes.
• An assessment assigns a value for property tax purposes, often different from market value.
• Lenders require an appraisal; local governments use assessments.
• Both impact your financial planning: appraisals affect your mortgage, and assessments influence your taxes.
• Knowing the difference empowers smarter home buying decisions.

Definition: An appraisal is a professional, unbiased estimate of a home's fair market value, typically ordered by lenders during the mortgage approval process.

Why it Matters:

• Ensures the property is worth the loan amount.
• Protects the lender (and you) from overpaying.
• Critical for final mortgage approval.

Pro Tip: Appraisals must be performed by a licensed or certified appraiser following the Uniform Standards of Professional Appraisal Practice (USPAP).

• Recent comparable sales ("comps")
• Property condition and features
• Location desirability
• Market trends.

Example: You’re buying a home for $400,000. The appraiser values it at $390,000. Your lender may require you to renegotiate, bring extra cash, or cancel.

Heads Up: If the appraisal comes in lower than expected, it’s not the end. You can appeal the appraisal or request a second opinion.

Definition: An assessment is a value assigned to your property by a government tax assessor to calculate your annual property taxes.

Why it Matters:

• Determines how much you owe in property taxes.
• Updated periodically (annually or after significant improvements).

• Mass appraisal techniques
• Property size, location, and use
• Standardized valuation methods.

Important: The assessed value often differs from market value. It’s usually lower.

Example: Your county assesses your home at $320,000 for tax purposes, even though the market value is $400,000.

Pro Tip: You have the right to appeal your property assessment if you believe it’s too high.

• Mortgage Loans: Appraisals directly influence how much your lender will finance.
• Tax Planning: Assessments help you anticipate your yearly property tax bills.
• Home Value Knowledge: Knowing both values can reveal equity opportunities.

Pro Tip: Always request a copy of both your appraisal and your latest assessment after purchase; knowledge is leverage.

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An appraisal estimates current market value for lending; an assessment determines property value for taxation.

Not necessarily. Assessed values often lag behind true market conditions.

Yes. You can usually appeal through your local tax authority if you believe your assessed value is inaccurate.

Yes. Lenders require a fresh, independent appraisal to approve a mortgage; assessments alone don't cut it.

Typically, the buyer covers the appraisal cost as part of closing fees.

Find the Perfect Mortgage for Your Dream Home with reAlpha Mortgage.

Compare options, calculate payments, and get expert guidance - all in one place.

Check if you qualify