By CATHY ALLEN, Real Estate Tips

Ever wonder what the difference between appraised value, market value and assessed value is? Here is a brief summary as it pertains to a single-family dwelling in the state of New York.

Appraised value is typically used for activities such as obtaining financing, valuing estates and dissolving joint interests in real estate (i.e. divorce). The appraised value is determined by a licensed appraiser.

The appraiser is an independent, licensed professional who calculates the appraised value of a particular single-family residence by reviewing recent sales of comparable or similar properties located in the same area as the property. The appraiser prepares a detailed report for the individual or institution requesting the appraisal.

For instance, a bank requires an appraisal when they are asked to lend money to a borrower who intends to use the loan proceeds to either purchase or refinance a property. The bank will take a security interest in the property and they require an appraisal in order to independently verify the true value of the asset (the property) on which they are being asked to lend money. The bank requires the value of the asset be higher than the amount of the debt for which the property is the security.

Due to the recent decline in real estate values, we have witnessed unusually high incidences where the value of the property originally used to secure a mortgage is now less than the amount of the debt. That's another discussion.

However, the impact of these recent events is to create more conservative appraisals due to financial institutions trying to avoid a reoccurrence of the current mortgage crisis.

Market value is typically used when a seller wants to sell their property or a buyer wants to buy a property. The market value is determined by both buyers and sellers, but primarily the buyers. It is the price a buyer is willing to pay a seller in an arm's length transaction.

The market value is the dollar amount homeowners might use when they assign a value to this asset in calculating their financial health. The market value is also used by licensed real estate agents when recommending to sellers what value to use as their listing price when they offer their home for sale.

Typically, the closer a property is listed to its market value, the quicker a property will sell and the closer its selling price will be to its asking (listing) price. Real estate agents determine the market value by comparing recent sales of similar properties in the area and making adjustments for condition and other relevant factors.

Assessed value is used for property tax purposes. The assessed value is determined by the assessor of the community in which the property is located. The assessor uses recent sales statistics to determine the value buyers are currently placing on similar homes from recent sales within the community and assigns a fair market value to an individual's property based on that property's characteristics and features. These include information such as square footage, acreage, number of bedrooms and bathrooms, exterior structures and more.