Becoming a homeowner is thrilling and intimidating all at once – but we’re here to guide you through it.
One of the more intimidating moments in becoming a homeowner, is learning real estate vocabulary. If you’re in the initial stages of purchasing a home, you’ve probably heard two prices discussed – assessed value versus market value.
What are the differences?
These two prices aren’t the same, so it’s important that you understand the variation between the two. And of course, knowledge is power – especially when you’re a first-time homebuyer.
Essentially, market value is the price a buyer is willing to pay for a home that a seller is willing to accept.
How is this value decided? Real estate agents look at some of these factors:
- Exterior: Curb appeal, condition of the home, lot size, home style, and availability of public utilities
- Interior: Size and number of rooms, energy efficiency, heating systems, and quality and condition of appliances and construction.
- Compare: They’ll take a look at similar homes in the same area that have recently been sold
- Supply and Demand: They’ll consider the number of buyers and the number of sellers in your area
- Location: What school district is your home in? How new is the neighborhood?
With a market value, no price is “right” or “wrong.” Bot listing and buyer agents can negotiate which price each party is willing to work with.
Usually, counties will employ an assessor to place a value on the home – this helps to levy property taxes on it.
The assessor will look at:
- Similar properties and what they’re selling for
- The value of any recent improvements
- Any income you may be making from – i.e., renting out a room
- The replacement cost of the property if something were to happen, like a fire or a flood
After the assessor takes notes on your property, they will deduct any tax exemptions you might qualify for. Then, that number is multiplied by an assessment rate – which is a uniform percentage that each tax jurisdiction sets (typically 80% to 90%) to arrive at the taxable value of your property.
For example, if the market value of your home is $300,000 and your local assessment tax rate is 80%, then the taxable value of your home is $240,000. $240,000 is then used by your local government to calculate your property tax bill.
Each town, county, and state is different – for more information, check this public records website.
For more real estate news and tips, check out Alliance Title’s Blog here.