It’s not uncommon for home buyers to get confused about the appraisal process, specifically understanding the difference between an appraised value of a home and the home’s worth as determined by a tax assessment. Just remember, your mortgage lender will be writing your loan on the home for the amount as determined by its appraised value, not the tax assessment.

So, what’s the difference between the two?  Simply put, a tax assessment is a tool used by local government (in the Savannah area, it’s the Chatham County Tax Assessors office) to set a property tax rate on home owners.  Tax assessments are done on all properties periodically, which is but one reason these assessments are seldom accurate estimates of a home’s true worth.  Home buyers are required by the lender to have an appraisal done and the lender chooses the appraiser from a pre-approved list which are available to the lender’s loan officers.

While “location” will be the prime factor in appraising a home, the appraiser will also seek out at least three similar homes within the same neighborhood, if possible, for comparison on the following: square footage, condition and age of the home, lot size, total number of rooms, number of bedrooms and baths, garage, deck, porches, fireplaces, views, and perhaps special amenities like sprinkler systems, hardwood floors, etc., If the appraisal comes in at an amount lower than the amount of the loan, the buyer has three options: go back to the seller and have the price lowered to the amount of the appraisal; pay the additional amount out of pocket, or terminate the sales agreement, provided there was language in the agreement that addressed a due-diligence period contingent on the appraisal being equal to the loan amount.

As with any issue that a buyer may have regarding the purchase process, it’s always recommended to seek advice from their trusted Realtor or appropriate professional.