Breaking Down What You May Know and What You Think You Do But Don’t…

There are things we think everyone knows, but they don’t…and then there are things we think we know, but don’t.  And in the world of real estate this can happen when we start talking about the various values placed on a home.  Did you know your home has several different values?

There’s the Assessed Value, the Appraised Value, the Insured Value, and the Market Value.

1.  Assessed Value

Assessed Value is the value San Diego county “assigns” your home.  The main purpose is to tax the property and that’s one way governments generate revenue.  Here are the things to remember about Assessed Value:

The assessment doesn’t take into account your new granite countertops.  The assessor doesn’t know if you’ve refinished your hardwood floors or any other updates or upgrades.  They will take into account if you’ve added any bedrooms, bathrooms or a new deck – the focus is less on the specific and more on the big ticket items.

The assessment doesn’t change as rapidly as the other values.  Most localities reassess every two years, although at the time of the reassessment, a property’s value could be kept the same.  So one home in San Diego could have the same assessment for four or even six years. The locality in which you live is not going to buy your home – remember this for later.

So what about Appraised Value?  This number is based on an appraisal, which is done when a buyer is looking to finance a purchase or a home owner is refinancing the home they already own.  There is both an art and a science to arriving at an Assessed Value, and here’s the scoop on Appraised Value:

2.  Appraised Value

An appraisal is based on recently sold properties, preferably ones that are as close in age, size, and proximity to the “subject” property that you’re interested in.  Also, the property will ideally have sold within the past six months or so. An appraiser will look closley at the subject home, taking note of the feature and amenities, and then make adjustments for the differences between that home and the comparable sales.   This one gets much more specific than the Assessed Value.

Appraised Values are tied to the recent sales in San Diego, so they can change often based on which homes have sold and for how much.

3.  Insured Value

Insured Value is the amount the insurance company will tell you it is going to take to replace your home if there’s a fire, earthquake (Here? Really), or other calamity.  What our locality assesses and the most recent appraised value has no bearing on what it would cost to rebuild your home – you’ll want to look very closely at your insurance policy (and speak directly to your agent! Ask questions! That’s part of what you’re paying your policy for) to fully understand what is covered to fully replace – and what is barely enough.

4.  Market Value

Everyone talks about “market value,” but the rumors aren’t true:  I (nor any other Realtor) determine this number! The buying public ultimately decides this – they are “ready, able, and willing,” and agree to pay a certain amount for a home on the open market.

Each of these values is relatively independent of the others – the assessor isn’t buying your home so they aren’t concerned with what a buyer will pay for it.  The appraiser doesn’t think about what happens if your home is destroyed, so they aren’t concerned with insuring it.  Buyers shouldn’t focus on the Assessed Value, because the purpose is to determine revenue, not what the market is willing to pay.

Hopefully these explanations shed more light on the topic, and have helped you to better understand the differences.

I host a free one-hour Buyer Boot Camp seminar that covers this topic, as well as other key topics, including the 17 steps of the home purchase process – and you’re most welcome to attend, whether you’re a first time home buyer or not.  The fun (and rewarding part) of real estate is helping to educate and inform, so your decision making is informed!

If you’re interested in attending my seminar, check it out here.

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