Tax Assessment & Market Value

The 2011 tax assessments are out for many of our local counties, and it brings about a recurring question from homeowners as well as potential buyers; "If the tax assessment says my home is worth _____ why isn't that the list price?"

It's understandable that people are confused, after all according to some county tax assessor's websites the assessed value is considered the "fair market value" of the home. While this is true in terms of determining a taxable amount for the property, it is not necessarily the fair market value in terms of buying, selling, or refinancing. 

The assessor's office is required annually to value all the properties under their jurisdiction in order to determine the "fair market value" so that they can tax the property accordingly.  It is unlikely that the county  has the resources to order individual appraisals for each property, at approximately $400 per home. My understanding is that they perform a "mass appraisal" looking at a particular zip code or subdivision for the past year.  In this way they can approximate and adjust the value from last year up or down in order to attempt to have an accurate tax rate for the property.

Since I started working in Real Estate for Michele Mamo in 2003 there has always been a variance of 10-20% in the tax assessment vs the sale price of the home.  In 2005 and 2007 as the market was peaking and then dropping the variance was as high as 30% in some areas.  This variance can be in the negative or positive depending on whether the market is experiencing rapid increase, or rapid decline.

So how is an appraisal different from a tax assessment?  In an appraisal a licensed professional appraiser will measure your property and compare it to three current sales and three current listings within a one mile radius. If you live in a more rural area and a one mile 90 day radius is not available, the appraiser will use the properties that are considered the "best available" comparables. Typically the closest in type, finished living area, and amenities. For example, it is unusual for an appraiser to compare a 2 level ranch-style house with a 3 level colonial unless there are no other properties available in the same area or time frame. "Current" typically means within the last 90 days, which is important to home buyers and Sellers. In 4 to 6 months the local Real Estate Market can change a great deal, making the appraisal's narrow time frame more accurate than a full year's worth of data and a mass appraisal.

Still have questions?  email us here yourprp@gmail.com