There is commonly some confusion between an appraisal and an assessment. It’s important to know the difference when you’re buying, selling, refinancing, or just in general as a homeowner. One is an actual indicator of your home value, while the other is a lagging indicator of value used to assess your property taxes for the County.
Your Property Tax Assessment
This value is assessed by the County (in this case Arlington), on January 1 of the calendar year. The county’s assessor uses similar sales from June – July of the previous year to come up with your value on January 1. That means they could be using sales from 18 months ago! That’s why we call it a lagging indicator, the market during the Summer of 2009 was very different than the Spring of 2011 when the tax assessments are mailed. Once they have that assessed value, they apply the current tax rate to come up with your property taxes for the year (for ex. in 2011 the tax rate was 95.8 cents per $100 assessed. If you’re assessment was $400,000, your property taxes that year would be $3,832). You can look up the tax value for Arlington County properties here.
What that means for your sale price?
In Arlington, it’s very common for a property to sell above the tax value. In fact, it’s so rare that you’ll see it in the comments if it’s priced below tax assessment as a marketing feature. It’s common for properties to sell anywhere from 100%-115% of the tax value.
One more important thing to note…
If the property has recently been built, recently been renovated, had an addition, any substation work done to the property, the advertised taxes will NOT be reflective of that work. So you can expect your taxes to significantly increase next year when it’s assessed again on January 1.
Appraisal
The appraisal is ordered when you’re buying a house or refinancing your house. It’s ordered by your lender to a neutral 3rd party appraiser who will compute the current fair market value at the time of the sale/refi. They can use several methods to appraise the property, but they use recent sales (usually with in 90 days) and/or properties currently under contract.
The hope is that the appraisal comes back at least at the agreed upon sales price, but if it doesn’t, you have options to renegotiate the price or void the contract if agreeable terms can’t be reached.
This is the *true* market value at the time of the sale.