Local governments generally raise significant revenue by levying taxes on real estate. These taxes, known as property taxes, are based on the market value of the property. For homeowners, the market value is determined by a government assessment or appraisal of the worth of the property. The appraised value is based on a variety of factors, including square footage.
House values for the purpose of property taxes are usually determined by a county assessment or appraisal office. Some jurisdictions also conduct appraisals at the municipal level. A government appraisal is distinct from a private appraisal conducted during a mortgage application or sale of a home. However, government appraisers may take a commercial appraisal into consideration in establishing the property value for tax purposes.
Appraisers consider many factors about the home and the property it sits on in determining the value of the real estate. Intrinsic factors--those having to do solely with the property in question--include the number of rooms, design characteristics such as concrete foundations, presence or absence of central heating and air conditioning, and amenities such as a high-end kitchen with luxury appliances and cabinets. However, not all government appraisals are based on actual site visits, so the intrinsic details of a property are not always well-known.
The overall livable area within a house, its square footage, is a principle intrinsic factor in determining a home's appraised value. Government appraisers, in particular, have access to a home's plans but may not visit a site in person, so that the plan details, such as overall square footage, are a useful and necessary part of the appraisal process.
An appraiser also takes into account external factors, such as the purchase price of other homes in the same area with similar overall features, trends in market prices and neighborhood amenities.
Government appraisals may be limited by local homestead laws that set a cap on how fast a home's appraised value can increase for tax purposes. Because of these limits, government appraisals may differ greatly from private appraisals in some areas.
- Harris County (Texas) Appraisal District: Cost Approach to Value for Single-Family Property
- Harris County (Texas) Appraisal District: Information About Appraisal
- Federal Deposit Insurance Corporation. "The Home Mortgage Appraisal: How Consumers Can Benefit." Accessed May 27, 2020.
- The Appraisal Foundation. "A Guide to Understanding a Residential Appraisal." Page 4. Accessed May 28, 2020.
David Sarokin is a well-known specialist on Internet research. He has been profiled in the "New York Times," the "Washington Post" and in numerous online publications. Based in Washington D.C., he splits his time between several research services, writing content and his work as an environmental specialist with the federal government. David is the author of Missed Information (MIT Press, 2016), a book exploring how better information can lead to a more sustainable future.