So, here's my situation... My wife and I own a 112 acre farm in Virginia. We bought the raw land in 2013 for appx. $305K. Since then, we've put nearly another $200k down for building a new house, driveway, & some fencing (doing much of the work ourselves).
My plan is to reappraise the property to reflect everything we've done to date, then pull out equity to pay off a few debts and also have a large amount for a downpayment on a 12-20 unit apartment deal.
The most recent tax assessment of our property (which doesn't reflect a lot of the work we've done in the past 6-8 months) has the property at $430k. From what I researched, depending on the multiplier used, this should represent 60-80% of the appraisal value (which had me stoked!).
HOWEVER, the appraiser just left and during our conversation explained that the new law is that assessed value has to be 100% (which I took to mean that my appraisal can't be above this number now). Further, the appraiser told me he has to go by local comps- which in the rural location of our farm isn't promising since very little turnover happens unless someone dies. The appraiser told me our appraisal could even be LESS THAN the assessment, which has me on pins and needles.
What do you think? Does what the appraiser told me sound correct? Did I mention he's also on the board of the local bank which I approached to do this loan? Should I be concerned, or is that irrelevant? Should I hire another appraiser? Or is that a mute point now? Help!? TIA!
Assessed value and appraised value are rarely in sync. Usually appraised value is more accurate.
If appraised value comes back low, read the report to understand the comps used. Talk to the appraiser. There may have been a recent sale or two dragging down your valuation. If you have a good reason why one of those is an incorrect comp, you may get it changed. Or, you can wait for new comps to come in but that may take a year or so.
If you disagree on the comps used, then seek, another bank.
On a positive note, if the appraised value does come back low, go contest your property tax assessment. You might save some cash.
There is no correlation between appraised and tax assessed values.
The appraisal will be based on recent sales comps. When you have a rural property, then comps can be quite difficult to find at times.
You do not have a choice in the appraiser hired.
Russell, I could go with another bank and hence another appraiser. Perhaps one outside of the county. That's what I meant. Thanks for your input.
Assessments are appraisals and appraisals are assessments. These are similar words for the same thing, valuing the property. There are some licensing and methodology differences, but the basic concept is the same. Your assessment is an opinion of property value developed and reported by an individual at the request of the taxing municipality and in your case, the appraisal is an opinion of value developed and reported by an individual at the request of the bank. Generally, a municipal assessment and a bank appraisal will both be an opinion of market value, but not always. That not always applies to municipal assessments of agricultural property. So, in your case, it is possible the two valuations could be very different, if your area uses something other than market value for assessments. You would need to research this in your area to find out.
Now that I got through that, you need to consider that any opinion of value is a tool, not an absolute. Real estate markets are imperfect and generally work with margins, meaning a subject property is often best valued as a range, rather than a single price (for instance $200k-$250k, instead of $225k). There should be no REI who does not understand this dynamic, considering it is how we make money investing (tougher to get a "normal" person to grasp the concept). Therefore, not only is it possible two opinions could be different, it is likely two opinions will be different, especially when defined as a single price, rather than as a range of value.
I hope that helps!
I am not an appraiser in your area and as a licensed appraiser, can not legally start drawing conclusions about your property. That said, the first thing that jumps out is you paid $305k and the assessment is $430k (supposedly not counting the improvements you made). That could suggest you either got a great deal, or the assessment may be way off, or as I pointed out earlier, the assessment method may be something other than market value.
Assessed is AVM. Appraisal is handpicked with adjustments. Suggest you wait til there are sold data perhaps during a more active 2018 time frame. If you hire another one it will still be based on same comps selected. Often they need to be close by 1-5 miles radius in same neighborhood.
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