Appraised Value Vs. FMV
I found a duplex that is rented for $875 per month total. The owner is asking $70,000 for the property, but the appraised value per the appraisal district is $20,000. Am I missing something? Will the bank go by the appraised value or FMV if I attempt to get a loan on the property? I am very confused.
The bank will use the appraised value.
[addsig]
I'm not sure about a 'district appraisal' but there is a difference between a property's assessed valuation for tax purposes... and an appraisal to determine a property's fair market value.
Due to the disparity, it seems that a district appraisal is an assessment for tax purposes... why not call the local tax assessor and ask?
When you say "appraised value per the appraisal district" do you mean the value for the tax assessment? If so, do not worry about that value. The asnk will lend on the FMV as estimated by an appraisal.
Yes, I do mean the appraised value for tax puposes. Why would the county Appraisal office appraise it at $20,000 if FMV is around $70,000? Why such a big difference between the two numbers?
In Texas homestaed exemptions and many other factors play into a tax evaluation. It is not uncommon for there to be such a difference in values. In my county properties are often tax appraised as much as 100,000 below what the FMV is.
In Austin, TX tax appraisals can be higher than FMV. Some appraisal districts can be very aggressive.
The taxes are re-evaluated every so many years, and are almost always lower than the Fair market value. When you purchase the property for more than your seller did, that will go on record and when the property is re-evaluated for tax purposes they will take that into consideration. My escrow pmt went up $50/mo on two of my properties this year partly due to the new tax bill (partly due to increased insurance). Unless the property is in an extremely high tax base (and from the rental I doubt it), the tax valuation plays a very small part. Run some comps, get a current market appraisal. More valuable, find out what the rents are going for and how available units are in your area-what's your net income going to be on this property? True I haven't had my coffee yet but 70K and $735 mo--are you pulling enough cash flow to warrant the maintainance of two units and will one side pay enough of the mtg to keep you in your comfort zone?
The current owner maybe basing this price on the cap rate because it's a rental property. That's what they do alot of times in commercial deals.
Also, I know in my state that the Taxable value is about half of what they really think the property is worth. So, your case the appraised value could be more like $40,000. Still a big gap, but could explain some of it.
I would bet he is basing his sale price on CAP rate.
The current owner maybe basing this price on the cap rate because it's a rental property. That's what they do alot of times in commercial deals.
Also, I know in my state that the Taxable value is about half of what they really think the property is worth. So, your case the appraised value could be more like $40,000. Still a big gap, but could explain some of it.
I would bet he is basing his sale price on CAP rate.