Assessed Value vs. Market Value

Home owners in our area whether they are selling or not should be aware of the widening gap between the assessed value of their homes and the market value of their homes. In order to understand the problem we must first understand the difference between the two values. It also helps to define a context for what real estate value is.
Real Estate Value: A subjective opinion based on empirical evidence created for a specific purpose. There are really 3 basic types of values to define; Assessed value, Appraised value and Market value.
Assessed Value: Value placed upon a home by the town assessor for tax purposes. These numbers are created and used to raise the tax revenue used by a town to operate.
Appraised Value: The value assigned to a home by a licensed appraiser, usually done when a mortgage is being created and the property is being pledged as security for a loan. May also be done electively by a homeowner for a fee.
Market value: The price an informed, ready, willing and able buyer will pay for a home at any particular moment in time.
The problem that we are seeing now is that the assessed value of homes in some of our areas, in general, is higher than the market value of the home. The result of this is twofold; first homeowner are paying more in taxes than they should be and secondly, homeowners may believe that their homes are worth more than the market value, making them difficult if not impossible to sell.

Another way to look at this comparison:

Assessed Value vs. Market Value - Assessed value is the valuation placed on property by a public tax assessor for purposes of taxation. It is not the same as Fair Market Value. Fair Market Value is the agreed upon price between a willing and informed buyer and a willing and informed seller under usual and ordinary circumstances. It is the highest price estimated in terms of money which the property will bring if exposed for sale on the open market with reasonable time allowed to find a purchaser who is buying with full knowledge of all the uses and purposes to which the property is best adapted and for which it can be legally used.

Petitioning the value is really a simple process. There is usually a certain time during the year where the appraisal district will hear your petition and render a decision.

Homeowners like when their homes' "market values" steadily increase every year, because it helps to raise their net worth. These same homeowners dread when the "assessed values" of their homes also increase, which most likely translates into higher property taxes.

It is also good to know what percent of valuation your city or town uses to determine tax rate. You can find this out by looking at your tax bill or contacting your town or city assessors office.

The assessed value is nearly always out of date by the time you get it. Each state has different laws determing what date the estimate of value is to be determined for.

The sellers realtor's job is to do market analysis and price the property accordingly. If the sellers realtor did there job correctly then the asking price should be a correct asessment of value.

There are different types of housing values available. One type of housing value is the assessed home value which is assessed usually by your county auditor. Usually your assessed home value is less than the actual market value of your home may be. This is usually a good thing because the assessed value of your home is generally the basis for your property taxes.

Often, the asking price for the home is based upon comparable sales in the area - similar homes that have sold recently. Using the selling prices for those homes, they can determine what the home should sell for, and price the home accordingly.

A real estate agent (Realtors are members of the National Association of Realtors) can give you a value. Many real estate agents have a good idea of how much a property is worth by using comparable sales. Remember that comparable sales are historical and the best are the most recent as the comparables get further back into history the less accurate they are.