Why the Difference Between Assessed Value and Market Value?
Assessing the value of a home when putting it on the market with a realtor is affected by a number of factors. There are two numbers to consider when selling your home: assessed value versus market value.
In some cases, assessed value and market value may be similar. But in general, the assessed value will be lower than the market value. Each of these two numbers will be used in different ways throughout the course of the selling process. Knowing the difference can help you get a great deal.
Understanding assessed value starts with understanding who is assessing the property and why. Counties employ assessors to place a value on a home in order to levy property taxes on it. The assessor looks at what similar properties in the area are selling for. They also assess the value of any recent improvements, any income you may be making from the property (such as renting out rooms), and the replacement cost of the property if it were to burn down in a fire. An assessor is usually a real estate professional, so they are fully aware of the many aspects that go into the sale of a home.
Once the assessor comes up with a number, s/he will multiple that number by an “assessment rate” – a certain percentage in that tax jurisdiction. The percentage is usually 80% to 90%. So for example, if the assessor determines the market value of your home at $500,000 and your local assessment rate is 90%, then the assessed value of your home will be $450,000.
That sum will then be used by your local government to calculate your property taxes. The higher your home’s assessed value, the more you’ll pay in taxes.
The market value of a home is based on market conditions. That is, what buyers are willing to pay for a home, and what a seller is willing to accept. Websites like Trulia and Zillow will help give you an idea of how your home compares to others that have been sold recently.
Other factors will also go into determining market value. The main one is location. How desirable is the area? Are there lots of schools and amenities in the area?
In terms of the house itself, factors will include the exterior condition of the home, style, availability of public utilities and so on. It will also include the number of rooms and their sizes, appliances, heating systems, energy efficiency and so on.
Supply and demand will also drive up market value. If there is a seller’s market, anyone seeing your house as their dream home might be willing to offer more.
The market value will be used in your listings as a fair asking price for your home. This is also a ballpark figure that the prospective buyer and their agent can use to estimate the value of the home. This will ensure they have enough financing in place, and so on. Everyone would like to get a great deal and ensure the transaction goes as smoothly as possible,