to sell for within the constraints of its local market and neighborhood. What would other comparable homes sell for at this time and in this market? Appraisal Value: Refers to the amounts “contained in an appraisal report for a specific property” (www.accountingcoach.com). It’s the value given to a home after a professional appraiser has conducted a thorough evaluation of the home and its worth. The appraiser will look at various aspects of the property’s features, including “size, type of construction, location, condition, and recent sales of comparable property in the vicinity.” The appraisal value is especially important in determining how much money could be borrowed (by the buyer), and under what terms and conditions. • Example: “Appraised values are useful because a company’s balance sheet will report its land and buildings at their acquired cost and will report the accumulated depreciation of the buildings. (Land is not depreciated.) Therefore, if the company wants to refinance its real estate, a current appraisal will usually be required.” (www.accountingcoach.com) Assessed Value: Refers to “the amount that a local or state government has designated for individual properties” (www.accountingcoach.com), and is often different from market value and appraisal value. Property tax, when it’s levied, is based on the assessed value of a home. About 60% of U.S. properties are assessed higher than their current value, and this assessment doesn’t reflect what the property will sell for. • Example: “Assume that a company’s warehouse is located in a city. The city tax assessor is responsible for determining the assessed value for every parcel of land and every building within the city. The city government then 48
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