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Proposition 13 in California

Assessor vs. Appraiser

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Why is there sometimes a huge difference between what the Assessor says a property is worth and what an appraiser says? I’ve included five points below to help answer this question.

Base year value: Assessments in California are based on the year the property was purchased (“base year value”). If a property was purchased in recent years, the assessment might be similar to current market value, but if a property was bought in 1980, for example, the assessment could be significantly less than what the property is currently worth since property taxes are only allowed to increase by 2% annually according to Proposition 13.

Mass-appraisal process: The Assessor’s Office uses a mass-appraisal process that comes up with a value based on crunching numbers behind a desk. This process is not able to account for condition, quality of construction or other issues an appraiser is able to see in person.

Assessments may be outdated: When the market changes rapidly, the Assessor’s Office may or may not stay on top of market movement in all cases. For example, in the past two weeks I’ve done research for several Sacramento property owners and their assessed values were literally hundreds of thousands of dollars too high.

Assessment figures are based on January 1: Property tax assessments are based on January 1 of the given year (date of assessment), whereas an appraisal could be based on any date.

An assessment is not market value: Assessment figures are not the result of the interaction of buyers and sellers in an open market, so they cannot be considered to demonstrate “market value”. This is one reason why appraisers do not use the assessed value on a property as a “comparable” in an appraisal report. Read Fannie Mae’s definition of market value here.

All things considered, can you see why there might be a difference between assessed value and appraised value? This is exactly why appraisers don’t give weight to tax assessments during the appraisal process and why lenders do not lend on tax assessment figures. Let me know if you have any questions or insight.

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook. 

What is the difference between “assessed” value and “appraised” value?

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Maybe you’ve wondered before if there is a difference between “assessed” value and “appraised” value? Here are five key distinctions.

1)  Assessed value is a dollar amount assigned to a property by the Assessor’s Office typically for the purpose of assessing taxes. Appraised value is an evaluation of a property’s value for any point in time by a professional appraiser.

2)  Assessed value is rendered by the Assessor’s office or county, while appraised value is rendered by a professional appraiser.

3)  Assessed value is deciphered through using a mass-appraisal process without inspecting each property, while appraised value most often includes actually inspecting the property to determine the value (not always though as there is such a thing as a desktop appraisal where the appraiser values a property without leaving the desk).

4)  Assessed value in California is based on the date a property was purchased, while appraised value can be based on any date – whether today, yesterday or years ago. As an FYI, assessed value in California is governed by Proposition 13, which basically means that a property will be assessed based on its purchase price from 1975 onward and will have annual increases limited to the inflation rate or 2%, whichever is less (read more here). The Proposition 13 value is commonly referred to as the “base year value” because subsequent years of taxation are based on that value.

5)  Assessed value segments land and improvements in the valuation, whereas appraised value may or may not do this depending on the needs of the client and scope of work. For example, the Assessor might state a property is worth $250,000 and the land in this circumstance is worth $100,000 while the improvements are worth $150,000 (house and anything on the site). 

Do you have any questions? Can you think of any other differences? Comment below. 

If you have any real estate appraisal, consulting, or property tax appeal needs in the Greater Sacramento Region, contact me at 916.595.3735, by email, on our appraiser website or via Facebook.