When determining the current value of your home, it
is important to differentiate between the assessment and the market values. These
values are usually not equal amounts and serve different purposes.
What is assessment value?
The assessment value of your home is the dollar amount
on which your local government levies property taxes.
What is market value?
The market value of a home is the dollar amount for
which the home would most likely sell in the current real estate market.
How is assessment value calculated?
Different counties and cities use their own formulas
to determine what portion of the value of your home is subject to taxation. When
the assessment is made, factors such as the purchase price of the home, replacement
cost of the home and the land value are considered. In some areas, assessment
value is based on the market value of the home. In other words, if assessment
value is calculated at 100% of the market value, it is possible for the assessed
value to be the same or similar to the market value.
Generally, county or other local government assessor offices issue assessment
letters to property owners. The value listed in the assessment letter is often
the assessment value until a new letter is issued.
Since taxes due are calculated on the assessment value, it can be beneficial to
have a low assessment amount. Some assessor’s offices allow property owners
to appeal if they feel their house was assigned an overly high assessment value.
One circumstance where owners may wish to do this is when property market values
have fallen. If the assessment value is higher than the market value, an adjustment
may be in order.
How is market value calculated?
Market value is determined by looking at comparable
home sales in the local area, competitive home listings, the square footage, location,
amenities and condition of the property in question. The market value is a theoretical
amount; it assumes the property will bring this sale price if it is made available
in the real estate market with reasonable marketing and with ample time provided
to find a qualified and interested buyer. The home may sell for a higher or lower
price, but the market value is a good estimate of what the house is currently
worth. Market values fluctuate based on the competition of comparable homes available,
recent home sale prices and general market timing issues. Home market values may
be consistently higher in some seasons than others, and are affected by other
factors like interest rates. Once a home has been sold, the price for which it
sold is referred to as the sales price, as opposed to the market value.
A professional property appraiser can assess the current market value of your
home. Real estate agents use much of the same data as appraisers to help sellers
price their home when they place it on the market.
Both assessment and market home values are affected by the location of the property
and the condition of the home itself. While the assessment value may only be a
percentage of the market value, generally if the market value goes up so does
the assessed value.
