There is very little correlation in most circumstances between the assessed and market value in real estate. Unfortunately, the myth of assessed values having a strong correlation to their present market value persists. Often the general public gets confused about this because some realtors fail to educate their clients that there is a big difference between an assessed value and fair market value. Home prices aren’t set in stone, their value can change depending on a few key factors and that is what makes buying and selling real estate so challenging. The following will clear up any confusion about these terms so you can use them to your advantage…
What is Market Value?
Market value is an opinion of what a property would sell for in a competitive market based on the features and benefits of that property (the value), the overall real estate market, supply and demand, and what other similar properties have sold for in the same condition. Market value is the estimated amount active buyers would currently be willing to pay for your home. Your home’s market value is determined by an appraiser, who is typically hired when your lender is deciding how much money to provide in a loan or you are setting the list price to sell your home. A home’s market value is often a good starting point for determining all kinds of concerns that home buyers might have. Real estate agents are trained to give a seller several suggestions of how to pinpoint a home’s market value. This is done by looking at a variety of characteristics of your home…
- Curb Appeal, exterior condition of your home. lot size, availability fo public utilities
- Size and number of room, appliance quality, heating system, and energy efficiency
- The selling price paid for homes recently in your area
- How desirable is your neighborhood, your school district, and what is the crime rate?
- Listing agents will use all this information to come up with the value of your home to help you come up with a fair asking price for your home. No number is right or wrong, the final deciding force is
- what price a buyer and seller determine they are willing to accept to close the deal.
What is the Assessed Value?
The assessed value of a house is the dollar value assigned to a home in order to calculate its property taxes. A municipal property assessor is responsible for deciding the assessed value for every home within a given tax district. Some assessors work for a county or village, but most are employed by a town or city. To arrive at a value for tax purposes, the assessor looks at what similar properties are selling for, the value of any recent improvements, any income you receive from renting out a room in the property, and other factors, like the replacement cost of the propertyu if you have a fire. Assessors are professionals, who consider every possibility. Each community sets an assessment rate also known as assessment ratio, a uniform percentage that each tax jurisdiction sets that is typically 80% to 90% to arrive at the taxable value of your property. So if the market value of your home is $200,000 and your local assessment tax rate is 80%, then the taxable value of your is $160,000. That $160,000 is used by your local government to calculate your property tax bill. The higher your home’s assessed value the more you will pay in tax. You can check your local community to see your home assessed value amount.
What Assessed and Market Values Mean to You
In a nutshell, the market value is how much your home is worth currently on the market and the assessed value is typically based on a percentage of the appraised value which is used to determine how much property taxes you will owe on your home. While a home’s value in the market can rise and fall based on local conditions, assessed values are typically not as sensitive to fluctuations. Do not be upset if your home is assessed at a lower amount than you figured. It doesn’t mean your property value is actually less. The thing to remember with values, both market and assessed, is that at the end of the day, the price of a home is the amount for which a seller is willing to sell, and the buyer is willing to pay. The only number that matters is the price a buyer and seller agree upon.
Tom has 20+ years experience in helping his clients buy and sell properties. Tom is also great resource for trusted vendors that can help assess and fix a property before buying or selling it.
About Tom Reese
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