How are home assessments determined?

Question

I want to refinance my home within the next 1-2 years. How do I maximize what my home is assessed at?

It's a 2 year old cookie cutter in a new neighborhood in Nashville, TN. I have two renters and am living in the 3rd bedroom. I'm likely going to move back in with my parents (who are closer to a new job I'm taking/so I can write off 100% of the home as a rental).

How does an assessor determine the value of my property? Is it determined by nearby sales within 6 months? There are new houses being sold down the street for 30k more than mine, will they get factored in the assessment instead of my neighbors?

Can I get a better assessment by installing wooden floors upstairs, putting up a fence, "improving" the kitchen, or having a perfect lawn?

Does the home being a rental influence refinancing?

Also, will turning the home into a full rental property influence my goal to get a second mortgage, or will they only factor in my debt to income?

I'm meeting with a accountant next week for rental issues regarding taxes, but a lot of the lending is out of his scope. Thank you all for any assistance!

Chris Mason · Answer

Hi @Chris Duvall, to add a little more to what @Eddie Salisbury and @Christopher Phillips said, note that in the world of new construction appraisals, and ONLY in that world, do we make believe that a $10k counter-top upgrade adds $10k in value to the home.

Your home is no longer new construction, so you aren't in that world any more. Don't assume that $5k on hardwood will add $5k in value. It might add $2k in value, or nothing if floors of that quality are the norm among used homes in the area.

Christopher Phillips · Answer

@Chris Duvall

I think you mean appraiser. Assessors determine your property taxes.

Your appraisal is based on similar styled and sized homes sold within the last 3-6 months (12 months max) within a 1/2 mile to 1 mile radius, and with similar amenities and lot size. Rural areas need a little tolerance due to distances between comp. Any differences are adjusted by the appraiser's local knowledge like adjusting for a similar 4 bedroom vs a 3 bedroom house or with a garage vs no garage.

Yes. Your home will be compared to better or worse homes and adjusted based on the condition/upgrades.

Ways to help an appraisal: Spruce it up. Inside and outside. The appraiser is only in your house for about 15 minutes to take a few photos and verify the property information (beds/baths/style, etc). So, try to be around to answer questions. Things sometimes get mixed up if the public record is off. Point out recent improvements and provide receipts like for a new kitchen or roof.

If you have signed leases or rent data provide those as well or else the appraiser might pull rents from the area and could possibly use low rents.

Yes, turning it in to a full rental will impact your ability to get a second mortgage. Your rent history will determine how a lender decides to include the income or not in a your DTI.

Jon Holdman · Answer

Tax assessments are irrelevant for refinancing. What matters is what the lender's appraiser says. You want your tax assessed value to be as low as possible so your taxes are as low as possible. Typically assessors reevaluate properties every few years, and then just apply some percentage adjustment in between.

Jon Holdman · Answer

Appraisals and assessments both determine values. But an appraisal is done when you really care about the number being correct. An assessment is done just for taxes. As long and the total assessment for a tax base and the tax rates generate the desired amount of income, the assessor doesn't care too much about individual values. And, no, an assessors does not commonly look at the property.

Chris Duvall · Answer

@Christopher Phillips That is exactly what I meant.

Thank you!

Chris Duvall · Answer

Thanks Jon, are you saying a lender's appraiser isn't even going to come out and look at the house before assessing it?

If they do come out to look at the home, I'm wondering what metrics they use to determine the value, and if I can do anything to bump the value of the home up so I can get a higher assessment and better refinancing.

How are home assessments determined?

How are home assessments determined?

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