Here at The Hart Team, we consider it our duty to make sure our clients, customers, friends, and family are educated in the field of real estate. When someone comes to us with a question, we do our best to answer it!
This week’s question: Why is there a disparity between the town assessed value and market value?
Real estate is an industry that rarely stays still, which is what makes it so exciting! Two phrases that are thrown around a lot are “assessed value” and “market value” of a home. The question is: why does my home have two values? We’ll explore that in this post.
A home’s assessed value is what the town or municipality deems a property is worth in order to calculate property taxes. To arrive at a value, the assessor looks at what similar properties are selling for, the value of any recent improvements, and other factors—like the replacement cost of the property.
The assessor then comes up with a value for your home. In order to scale the taxes appropriately for the town, they will apply an “assessment rate,” a uniform percentage that each tax jurisdiction sets that is typically 80% to 90%. This is the value that the town will use to calculate your property taxes.
Casey Fleming, a former real estate appraiser and author of “The Loan Guide: How to Get the Best Possible Mortgage,” says the technical definition of market value is “the most probable price that a given property will bring in an open market transaction.” Or, in plain English, “It’s the price that a buyer is willing to pay for a home, and that a seller is willing to accept.”
Real estate agents calculate the market value of your home using a variety of factors, similarly to assessors. However, while both assessors and realtors use the facts to come up with an objective value, real estate agents have to factor in the state of the market as well. This value isn’t set in stone like the assessed value; a real estate transaction requires negotiations, and in the end, the market will determine what a property will sell for.
We hope that helps to clarify the difference between the assessed value and the market value. What other questions have you been dying to ask about real estate? Let us know in the comments!