If you are a home owner, you may have noticed that two distinct "values" of your home are used for a variety of official purposes. These common valuations are typically identified as property's fair market value and its tax appraised value. Depending upon the state and county where the values are calculated, these valuations may be exactly the same or they may differ by thousands of dollars.
The fair market value of a home or property is the amount of money a buyer, seller or lender should expect it to sell for. It is determined by an official appraisal of the property. Usually, the appraiser compares the property to similar properties in the geographic area that have sold within the past six month to one year. The appraiser then takes into account the property's unique assets and liabilities (e.g., a property fence is usually an asset, while a single full bathroom in a multibedroom home is usually a liability) and adjusts the property's value up or down accordingly.
If you are selling your property, you need to know what a fair listing price would be. A fair market value appraisal will determine this. If you are buying a property, a lending institution will insist upon an appraisal performed by a professional appraiser in order to confirm that the value of the property justifies the mortgage to be given on it. Similarly, if you wish to refinance your mortgage or get a home equity loan, a home equity line of credit or a business or cash loan where the property is offered as collateral, the lender will also require a professional appraisal.
Your property tax is tied to the property's fair market value. If your property's value has decreased due to the condition of the local housing market, you might want to have your property tax revised to reflect this. Furthermore, if your property suffered more than $10,000 damage due to a natural disaster, your property tax can be discounted. A reappraisal of the property is necessary to substantiate this.