Understanding The Home Assessment Process
A home assessment relates to how much a homeowner pays for their home over time. This process includes determining property taxes, an important and necessary expense for all homeowners. The following information details what home buyers can expect during a home assessment and how they can better understand the process before closing on the property.
Assessment vs. Appraisal
Although both are meant to clarify the value of a property, an assessment and an appraisal are completed in different ways and used for different purposes. For example, lenders are generally required to use an appraiser's value of the home when setting terms for financing, while assessments are used for property taxes.
An appraiser is meant to look at the most recent sales in the neighborhood to help them arrive at a value. On the other hand, an assessor is able to use past sales that go beyond the past few months. Both evaluators will take into account the relative value and any improvements the home had undergone over time.
How Does a Home Assessment Affect a Homebuyer?
The purpose of an assessment is to determine how much a buyer pays in property taxes. Because many buyers have an escrow account with their lender to cover common home finances such as insurance to taxes, a home assessment can affect how much their monthly mortgage is over time. Homes are assessed regularly (though the exact time length is determined by the district, but commonly at least once every five years), meaning the payments could be higher or lower throughout the course of ownership.
Property taxes are not determined by the home's value alone, however. Factors such as public services to schools is paid for by these taxes, meaning taxes can increase even if the home's value does not. Some pre-selling sites for apartments and condominiums like Precondo would have the tax information available upon request.
Understanding a Home Assessment
The rules of an assessment generally vary by tax district as opposed to state or county laws. The assessor will likely look at the following before determining the home's value:
- Curb appeal
- Condition of the home
- Amenities and features
- Condition of neighboring properties
- Size/square footage
- Access to services
The assessor will employ property records and other real estate data. After the home value is determined, it is then multiplied by the tax district's pre-determined percentage to determine the rates for each homeowner.
There are already rules in place to protect homeowners in the case of a large jump in home assessment value. For example, if a property increased in value by 300% between the time of purchase and the next assessment, each state has a cap on how much a homeowner's property tax would be allowed to rise.
Homeowners should not always rely on past property tax information to determine how much they will pay. The previous owner will be protected if their home increased in value, but the next homeowner will start with a new assessment value. A property tax tool can help home buyers estimate the yearly tax rate based on current data.
Homeowners have the option to challenge an assessment if they feel it is inaccurate. They can use services that can help them determine excess taxation based on the assessor's value.