WHAT IS AN APPRAISAL?

Appraisal is defined as the act of estimating value. An opinion of value does not make it a fact. An appraisal can be made on equipment, antiques and real property. The difference is that a professional appraiser has to be able to give evidence that the value arrived at is supported by the market. There are two types of appraisals to be considered. The first is the single-property appraisal, which is used by both fee appraisers and assessors. The second is mass appraisal, which is primarily used by assessors. A single-property appraisal is typically conducted on one property, using its features and improvements as the basis for any conclusions of value that are to be made. Mass appraisal takes the single-property appraisal and groups it with other similar properties to arrive at a value conclusion for each property in the group.

Assessor Department

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APPRAISAL AND ASSESSMENT: WHATS THE DIFFERENCE?

A guide for taxpayers and homeowners.

The appraisers opinion of value reflects the probable price that knowledgeable parties would agree upon when acting freely, without duress.1

FEE APPRAISAL: THE SINGLE-PROPERTY

Typically used by fee appraisers, this is the type most often seen by property owners. The fee appraiser may be hired by an individual or firm to give opinions of value for many purposes, such as a guide for investments, resale, or insurance purposes. In the case of a real estate mortgage, the appraiser is normally hired by the bank to do a single-property appraisal. This is to determine the value of the investment in the prospective property which the bank will be making. The appraiser considers all similar properties that have sold in the same area, in the current time frame, normally the last six months. This becomes the basis for the appraisal which is done to a single property.

The assessor needs skills in both mass appraisal and single-property appraisal.2

THE ASSESSMENT:
MASS APPRAISAL
Almost exclusively used by assessors, this process includes the single-property appraisal. The assessor is very similar to the appraiser, and often takes the same courses as the appraiser. The essential difference is in how the appraisal technique is applied. Because the assessment is done for tax purposes, it is imperative that each taxpayer is treated fairly in the process. In order to maintain as much equity as possible, a mass appraisal system is used in conjunction with the single-property appraisal. The assessor considers all similar properties sales in similar areas that have occurred in the last year. Then, assessors take the extra step of measuring values statistically against the sales that have occurred to make sure that they are as close to the indicated value as possible and that all properties are valued equitably.

THE DIFFERENCES
Although many of the features of an appraisal are the same as an assessment, there are two key differences. The first difference is that a single-property appraisal is most typically done for mortgage purposes, whereas the assessment is done for tax purposes. The second is that the assessment has the added element of the mass appraisal which uses statistical testing for accuracy. The purpose of the fee appraisal is intended to be used for investment purposes, whereas the assessment is a mere statement of value used for equity and fairness in taxation.

Simply stated, single-property appraisal is the valuation of a particular property as of a given date; mass appraisal is the valuation of many properties as of a given date, using standard procedures and statistical testing3