Appraised or Assessed?

​I'm trying to buy a house and the seller just wants too much for it. I checked the county tax rolls and the value of the house is much less than the appraisal. What is that about?

One of the trickiest distinctions for homeowners and would-be buyers alike is the difference between a property's assessed value and its appraised value. It likely doesn't help that the two words are so similar, but don't be fooled -- they are two very different values.

One (assessment) is the amount that's used by a municipality to calculate property tax, while the other (appraisal) is intended to represent the property's actual, or fair market, value.

The assessment is conducted by your town or city, typically every five to 10 years.
Often, an exterior assessment is conducted at the five-year mark to update municipal records, while the once-every-10-years assessment is more thorough and includes a review of interior modifications as well.
The assessment is typically lower than the appraised value; an assessor will determine fair market value (FMV) and multiply that by a percentage, which can range from about 70 percent of FMV to 80 or 90 percent.
That's the figure a property owner is taxed on; so if the FMV of your home is $200,000 and assessment is calculated at 70 percent, you pay taxes on the assessed value $140,000.

The appraised value is what a lender will use to determine a loan. If you've purchased a property with a bank loan, you know that one of the steps includes an appraiser heading out to assign it a value. This is the lender's verification that the property is worthy of the amount it's lending.

​These are important terms to keep in mind whether you're buying or selling because each can be a negotiating tool in the process.