Short answer: Yes. If an appraisal is part of your purchase or refinance transaction it is worth the investment.
But there are other things an appraisal can help with.
I have noticed a lot of reasonably priced homes with rather high tax bills. If you look at the history of these properties, many of them were purchased prior to the 2008 mortgage crisis.
It is hard to imagine that during the late 1990’s and early 2000’s, home values were increasing so rapidly if you bought a home with 5% down you had a good shot of getting rid of your mortgage insurance the next year. That is how quickly the homes were appreciating in our area.
How would an appraisal help now?
The appraisal is a third party assessment of your home’s value performed by a licensed appraiser. It is not a market analysis that a realtor would give you. However, if you have a realtor you know, that wouldn’t hurt to get you started.
If the tax base was set on a $400,000 home purchased in 2005 and you bought the same home for $250,000 in 2016, chances are the taxes were based on the original purchase price. The average tax base for real estate in Illinois is 2.28%.
$400,000 x 2.28% equals a real estate tax of $9,120 per year.
$250,000 x 2.28% equals a real estate tax of $5,700 per year.
If you buy that $250,000 home today and the taxes end-up at $8,500, hooray for you! You got a bargain. But, your taxes could be a little on the high side—an appraisal for that purchase would be proof of that imbalance.
If you feel like your neighbors are paying less in taxes—perhaps it is someone you know with the same floor plan, or you just can’t believe you are paying so much—contact your local assessor’s office for a description of the review process. You won’t need an attorney unless your taxes are high (like $30,000 per year) then you might want one.
Be prepared for this response: “Real estate taxes are a look back process and we have to incorporate what you were paying three years ago with what you pay now.”
That may have worked in 2010 when taxes were on the decline and assessors were averaging value loss. Local real estate values have leveled so that should have no impact now. Also be prepared to hear that the taxes cover a number of services that have all gone up in cost. Be brave and press on.
This is where the appraisal comes in. It can be used to back your assertions. The good news is that it has worked in some cases to lower taxes. That depends on you bucking the trend of government waiting you out in hopes that you will get frustrated.
The positive in all of this: when you look at historic sales of properties, you will notice that of all the big ticket items you want to purchase, homes have actually been the only one that has become more affordable.