The Difference Between Assessed And Market Values
When determining your overall financial picture, your home’s value is an essential piece of the puzzle. However, if you ever try to look up the value of your home, you’re likely to find a variety of answers. There is market value and assessed value, and they are determined in different ways, for different reasons.
Basically, the market value is how much your home is worth on the current market, while the assessed value is based on a percentage of the appraised value and is used to determine property taxes for the home.
While homeowners typically want to see their property values to grow over time, it is better for assessed values to be lower because the higher the assessed value, the higher the property taxes. Homeowners are often surprised when they receive their assessment from the local tax appraiser’s office because the assessed value is lower than what homeowners believe their home is worth.
Depending on your location, a municipal or county tax assessor will evaluate several factors, including any improvements you have made, whether you make any income from the property, the replacement cost of the home if it were destroyed and how much similar homes in the area are selling for.
Once the assessor determines a value for the home, he multiplies that number by an “assessment rate,” a uniform percentage that each tax jurisdiction sets, typically 80 percent to 90 percent. For instance, if the market value of your home is $200,000 and your local assessment rate is 80 percent, then the assessed value of your home would be $160,000. That amount is used by the local government to calculate property taxes.
Obviously, a home’s market value can rise and fall because of local market conditions, while the assessed values less arbitrary. However, assessed value can come up when buying or selling a home because this number is public knowledge.
Market value is used by lenders, buyers and sellers to determine the appropriate selling price given current market conditions. The practical definition of market value is basically what would a prospective buyer be willing to spend on a particular home and/or what would the seller be willing to accept if it were sold today?
Lenders usually hires a professional home appraiser to assess market value for prospective mortgage applicants or homeowners who want to refinance their mortgage loans.
Market value is determined by evaluating several factors, including:
- Overall condition of the interior and exterior of the home.
- Curb appeal, or the general desirability of the property and its surroundings, including painting, landscaping and other aesthetics.
- Factors such as square footage, number of bedrooms and lot size.
- Amenities such as a pool, major appliances or if it’s retrofitted with certain energy saving features could factor into the overall value.
- Comparable properties in the area with similar features sold recently. The appraisal should fall into the same ballpark.
- Buyer’s or seller’s market, and the overall state of supply and demand. If there is a surplus of homes on the market, values will decrease, and if demand is high, values can be inflated.
When evaluating the value of a home you’re buying or selling, it’s a good idea to consider market value, but it doesn’t hurt to also look at the assessed value.
In current market conditions, it’s best to consult with a local, experienced real estate professional. Knowledgeable Realtors with the expertise, resources, and connections to help you navigate today’s challenging market conditions proficiently and prudently will make a considerable difference.
The number one independent real estate firm in Colorado Springs, The Platinum Group Realtors, delivers experienced, highly skilled Realtors dedicated to quality customer care with the utmost honesty, integrity and attention.
For a no-obligation consultation, call today: 719-536-4478 or visit PlatinumHomeSales.com