The assessed value versus the market value of a home are often very different leading to confusion among homeowners. They are viewed as something that should be similar but in reality, they are very different from each other. Usually, the assessed value of a home is much lower than the market value . We’ll discuss why this is below.
Assessed Value vs Market Value:
The market value of a home is the amount of money the home generates when sold at listing price in an open market. This is the number that realtor’s and appraisers try to determine in an effort to figure out what a home is actually worth.
A good realtor tries to be as accurate as possible when determining this number. It’s important for the agent to help the seller understand assessed value vs market value of the home if there are discrepancies. Agents often have a slightly different approach when determining the market value of your home. But overall they look at the following:
Exterior: In addition to curb appeal, agents look at lot size, house style, exterior conditions, etc. Sometimes they offer home improvement advice as well.
Interior: Square footage, total rooms, heating systems, energy efficiency, and appliance conditions are all taken into consideration.
Similar Homes: An agent researches houses that are similar to the home in question, these are known as comparables or comps for short. Comparable homes give agents and appraisers an idea of what buyers are likely to pay for a specific property. As a result they help in determining the market value.
Supply and Demand: If there are more buyers than sellers, then supply will be low and it will lead to a seller’s market. Often, that means charging higher prices for homes. On the flip side, if there are more sellers than buyers, then supply is high and this leads to a buyers market. This means that buyers can get away with offering less than asking price or be more aggressive in their negotiations.
Location: Location is important. An agent will evaluate the neighborhood, school districts, crime rates, and other factors that may affect a homes price.
What is assessed value?
Assessed values are relatively similar to market value. Except they are not calculated by a real estate agent and are used for purposes other than selling the home.
Most local governments employ property assessors whose sole job is to determine how much a property is worth. This helps in calculating property taxes a homeowner will need to pay.
This number is found by utilizing comps (similar properties) as a starting point. From there an assessor looks at recent improvements, rental income. This also includes how much it would cost to replace a home if a natural disaster were to destroy it.
Assessed value and property tax bills
When an assessor has finished their assessment, they multiply the assessed value by the assessment rate. Various tax jurisdictions have their own assessment rate so it’s best to look at your county’s property assessors office website to figure out exactly what that number is.
If an assessor determines a home is worth $400,000, and the county a homeowner lives in has a tax rate of 80%, then the taxable value of that home is $320,000.
Disputing assessed value
Homeowners sometimes dispute their property tax bill by claiming that an assessed value is too low or too high. Essentially, they request that the property assessors office review their property value. This is in hopes that they will achieve the goal of lowering their property tax bill.
Either an attorney that specializes in this form of legal dispute can be hired or a homeowner can simply go to the property assessors office and file an “application for tax abatement”.
Every state has various rules to comply with when disputing the assessed value of a property. So again, it’s best to check with your county’s assessor’s office.
Christopher has been been in the Real Estate industry for 8 years and has had the opportunity to close over 1,000 deals while acting as the Managing Broker for thousands more. Christopher is passionate about continuing to find ways to simplify, maximize, and serve Trelora’s clients exceptionally well and spends his time building teams to deliver high levels of service. When not doing real estate Christopher can be seen training for marathons and ultra relays with his 2 year old daughter, eating pizza, and drinking a steady stream of Diet Coke.