The Difference Between Appraisals & Assessments

Lance Evans

BY: Lance Evans

In August, I wrote about assessments.  You may recall that assessments are opinions of value.  An assessor looks at all of the properties in a municipality and comes up with general values that are a component in computing the real property tax. While properties are treated similarly, assessments allow for differences like square footage, lot size, and general condition and upkeep. These variations can affect the assessment.

    How does this differ from how an appraiser works and how does an appraisal end up affecting the price paid for a property?

    Similar to an assessment, an appraisal is an opinion of value.  However, instead of looking at many properties within a jurisdiction, appraisers look at one property (subject property) and then find comparable sales (“comps”) that are like the subject property.  Ideally, comps are within a few miles and have sold within the past six months.  Like the assessor, an appraiser adjusts for differences in lot size, square footage, heating systems, etc. between the subject property and the comps to come up with a value. There is no set rule for what adjustments must be made. It is up to the appraiser’s judgement.  Adjustments are based on market reactions to amenities, features, or land size of a property.  Unique property types throw a whole other set of variables, so there is not a “cookie cutter” approach. 

    An appraisal usually varies from an assessment for several reasons. First of all, you may recall that the City of Watertown actually assesses at 92% of value. This means that a house that might be worth $100,000 would be assessed at $92,000. Other municipalities use different percentages.

    The other reason that there may be a difference is that appraisers are using data that is short term (6 months or less) and may cross municipal lines.  This means that an appraiser who has a subject property on the edge of a municipality might be using comps from a nearby town.  These would not figure into the assessor’s decision making process.

    In the North Country, the “6 month rule” does not always hold. Joel Howie, JC Howie Appraisals in Canton, noted that “One thing I consider in St. Lawrence County is a larger ‘market area’ or neighborhood when looking for comps. I may go outside an individual municipality to a competing neighborhood for comps. Because of the sparse population and diverse housing stock, I also may need to consider sales up to 18-24 months. Also, I may be appraising a modern colonial in Canton and I may need to consider a Potsdam sale in order to find sufficient sales data.”

    As I pointed out last month, an assessor works for a municipality.  Appraisers are generally self-employed and work for a variety of clients including lenders, private companies, and individuals.

    Much of an appraiser’s work is contracted by lenders.  The purpose of the appraisal might be for loan approval for a buyer or when a property owner refinances a mortgage.  The lender is required to use a variety of appraisers on a rotating basis and are not allowed to specify a certain appraiser.  However, the list can be limited based on an appraiser’s certification and approvals.  For instance, an appraiser needs to apply to be Veteran’s Administration (VA) certified.

    So what education is needed for appraisers? Like assessors, appraisers have taken special training to get licensed or certified. In addition to course work, they must work with a licensed or certified appraiser for a period of time.  After being licensed, appraisers take twenty-eight hours of Continuing Education every two years. A portion of this education is in Uniform Standards of Professional Appraisal Practice (USPAP).

    Property owners can also hire an appraiser.  The owner may want to find out what his or her property is worth prior to selling the property, it may be needed to help settle an estate, or the owner may want to check the worth against an assessment.

    Appraisals are usually effective as of the date of inspection.  Assessments are based on an earlier date usually as of the date the roll was submitted, which depending on that date could be nearly 2 years prior to the current date. In an increasing or decreasing market, assessment and a current appraisal may be quite different.

    So what is the difference between the assessor’s job and that of an appraiser?  Simply put, the assessor looks at the “forest” of properties and the appraiser looks at individual “trees.”

    In my August article, Last month I made an error in my article on assessment. I stated that if the assessment is $10 per thousand dollars then a property assessed at $92,000, the bill would be $92.  It would be $920.