Assessed value and lenders?

Question

Which is more important to a lender-assessed value, appraised value or asking price? In what order? Dan

Don Konipol · Answer

I know of no lenders that care about assessed value.  Appraised value is important, price paid is important.  Lenders do not care about asking prices.

Bryan Hancock · Answer

Of the ones you listed appraised value is the most important to lenders.  They hire an independent appraiser to assess the value of the property and they will use that value for lending UNLESS it is higher than the purchase price.  Lending generally goes on the lesser of appraised value or purchase price.  Lenders do this because they want you to have â€œskin in the gameâ€ and because they want to be conservative.  My understanding is that there are actually laws that mandate this too.  Many of the larger loans I have seen quote â€œLTCâ€ (loan to cost) instead of LTV so that there isnâ€™t quibbling over what â€œvalueâ€ means.

Assessed value really only has meaning from a taxation standpoint in my experience.  I donâ€™t know of any other parties that use that except for possibly some insurance folks.

Asking price is generally a figment of someoneâ€™s imagination and shouldnâ€™t be very important to anyone on the buy side of a transaction except to signal whether or not the property is worth bidding on given what the buyerâ€™s opinion of value is from their underwriting.

So (from most important to least):

1.  Appraised value
2.  Assessed value
3.  Asking price

2 and 3 are really meaningless to lenders from my experience so they should probably carry equal weighting, but asking price is completely meaningless to all partiesâ€¦including lenders.

Account Closed · Answer

Bryan hit the nail on the head. When I was a lender I cared more about appraised value more than anything else. If an appraisal is not required I would get a broker's opinion or find comparable sales in the neighborhood hopefully. Assessed value and asking price means nothing. When times were good it used to be that assessed value was usually less than the appraised value. Not the case nowadays. Another reason a lender would not use assessed value is because homeowners are constantly disputing their tax assessed value on their homes which does not reflect a reasonable evaluation of real estate. If anything contract sales price would be behind appraised value. Some appraisers will use contract sales price to further justify their appraisals.

Bill Gulley · Answer

The lender looks to the appraised value. They don't care what the asking price was, but then the contract price. The loan originator/officer, processor and underwriters/management probably don't even see the assessed value unless they see it on the appraisal, if they read it. Under the lender's roof, the contract price and then the assessed value are most important because you must know that to complete the HUD-1 closing statement. Then, when it goes to the loan servicer, they only need the assessed value, if they collect for the taxes to be paid.

So, all are important, depends on who under the lender's roof is looking at the deal.

Jason Wheeler · Answer

In CA every lender requires an appraisal and can really care less about assessed value.

In a purchase you can have some major problems if the price is different from the Appraised value.

Bryan Hancock · Answer

Yup...we actually have retained a company every year that works on a contingency fee to automatically dispute the assessed value.  A nice service to have!

J Scott · Answer

What Don said...

Basically, lenders want to make sure that the appraised value is equal to or greater than the purchase price.

Assessed value and lenders?

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