In any area we've lived in, the tax assessor's numbers have lagged behind the actual sales numbers. In Michigan in the 80's for example, you'd actually double the assessed value to get an idea of fair market value. The assessor doesn't determine how much your home in worth on the open market, the market determines that. Flippers haven't messed up values in our area because flipping doesn't work very well in an area like ours that sees a slow steady property value increase of 3-5% annually. You will find some homes that sell well below assessed value and others that sell well above it. A home will sell for fair market value despite what the assessor's office says.

We have a lot of flippers in recent years. Because we have a lot of distressed property situations here (bank foreclosures, etc.) and lot of old people going away. They do cosmetic rehabs. I am fearing they are messing up the market by what they are asking (mostly too much). And our area is hard to comp I have been told.

No! Your tax assessment value is not the same thing as your asking price, even if you are in an area that supposedly tries to match assessed value with market pricing.

The reason for this is that it is more important in most areas for the assessment data to be relatively equitable among properties (and tax payers in the same jurisdiction)than for the assessment data to perfectly track recent sales, on a sale by sale basis.

This is essentially the difference between an "assessed" value and an "appraised" value. The assessment is for governmental revenue purposes and an appraisal is to establish market value, i.e. what you could expect to get for your property if you offered it for sale within a reaonable time period, i.e., now. Most people think of an appraisal as something done on behalf of a lender to evaluate whether or not to lend money secured by a particular piece of collateral, but it is also sometimes used to help co-owners (heirs, sibs, partners, divorcing spouses, etc.) divide property fairly and for individuals to get an idea of their porerty's likely selling price. . For this reason it is good way to get information when thinking about your pricing if you are ready to market.

And an appraisal is slightly different from a CMA done by a realtor trying to attract a client to list with them. In many cases the realtor may suggest a sligtly higher asking price than what the appraisal data would indicate. This is partly to make owners feel good about a particular realtor's likelyhood of getting them top dollar, but it is also a rational way (in some markets) to test the waters and see how much interest is there. Remember, an appraisal is based only on closed sales, similar to a CMA, but it's not really intended to give you a figure that is the highest imaginable selling price if you get lucky, just the most likely fair market value if exposed to the market over a certain, shortish period (90 days, say).

Your tax assessor is more interested in making sure that she/he has collected all the amenities in your house and making sure that relative to other similar houses your assessment is "fair". At present the amenities are the sorts of thing that typical real estate buyers are interested in, but truthfully, the tax assessment data could be based on any standard, say the number of drawers vs doors in a kitchen, or the number banisters in your stairs. (At one point in the early part of the US history, they taxed windows, so people made houses with fewer of them. In France they taxed the number of stories, so the Mansard roof style was developed to gain living space without being taxed for it.)

There are two other common reasons why tax assessment data and fair market value diverge: the first is that in some jurisdictions assessment changes are only entered once per year, so many renovated houses lag, and secondly, in some jurisdictions houses that don't change hands are not updated. This results, over time, in gross inequities in tax collections, though it's a political nightmare to try and correct.

And finally another factor, which always amazes me, is that at least in NY where I live, for tax assessment purposes old houses are substantially depreciated on a fixed basis compared to new construction. I happen to live in 150+ yo building in excellent condition, and everything in it is a certifiable antique. But if you created an exact replica (even with modern plaster, slate and flooring, etc.) it would by assessed at well more than twice of my assessment. It really makes no sense to me, since I can get a premium resale price for my old building over a replica, simply because it is old, but I am taxed at a very low rate because it is automatically depreciated due to its age. Go figure!

If you're thinking of selling, I would pay for an appraisal and ask at least a couple of realtors for a CMA. (You aren't obligated by that. )Then you'll have a better, more up-to-date idea of your house's market value, in your market, right now.

Molly~

Also, the inconsistency in how MUCH the assessor's valuation differs from the asking price (or the market value) is something I would expect.

Maybe those are houses for which the assessor has not gotten up-to-date info, or hasn't gotten around to dealing with. Or they're in some zone that's affected by vriations in assessment percentages. Or a locality has rules about not raising the assessor's valuation if someone has lived in the home several years. Or they're in a price of size category that the city officials haven't kept up with the market.

The assessor is all about TAXES. He's not about "selling price."

As others wrote, assessed value has little to do with market value. Market value is closer to appraised value.

In our town the assessed value is anywhere from 40-85% of actual market value. They determine the land value and then determine the house value. And the way they do it is very formulaic. Each bedroom, bathroom, etc., is worth so much. Square feet are worth so much. A porch, deck, etc., all worth more. They don't look at comps, they don't consider things like a toxic waste dump or a highway next door (which will affect your market value). It's all about the numbers.

If you want to know what the house should be listed at, speak to a realtor or look at comps of recently SOLD houses. Don't look at assessments.

Thanks - for the info. Just so happens that our assessed value would be nearly the same what we would ask - from what I am seeing houses go for in our area now. I would not sell without getting comps that's for sure.

You are right, they don't take into account the fact that your house is next to busy street, overall condition of house, etc.

In my area, there are NO 2 houses that are the same. Most are very old (1920s-1930s) and have been improved again and again over the years. I think that the problem may be the comps are off on these houses that aren't selling. And the flipper element coming into play.

We did get an appraisal when we were getting a home equity years ago to put a second story on our house. We went to a second appraiser because the first could not comp our house to our liking. We have water front and the first could not find waterfront comps.

Thanks all! Very very helpful.

Regardless of the facts and the way things are supposed to work people do look at tax assessments and if the difference between the assessed and asking price are wildly different that can confuse new buyers. I'm not sure how to address this - a buyer's real estate agent could hurt if also new/not knowledgeable or help if they can explain whats going on well.

I'm going to guess assesments are kept low for four reasons:
1) Some weird local rule that makes them not real market value based.
2) If they tried to track market value, you'd see appeals like crazy. When they're clearly under no one appeals that they're less under than their neighbor.
3) It prevents politicians from having to "raise taxes" when the market slows. They can just crank the valuation a bit and claim a tax cut or that they "held taxes steady". (Yes, seen this one done more than once.)
4) Name one time government has managed to track reality when it comes to money.

Are you selling? What about all of your fine neighbors??!!?? I know you'll hate leaving them behind.......

I've been following & posting over in Home Disasters since moving to our new neighborhood with pesky, trespassing kids on ATV's & I have truly sympathized with your plight.

Back to your question - in our area, the tax # is almost always less - lots less. When we sold our old house (built 1910) we got double the value they had - and the discrepancy was never questioned or even brought up, it was just expected. It was in a rural area that has been ignored ( yipee!) by the taxman for years. Our new house is valued about right though since it was built in 2003.

Good luck to you if you're selling!

No, we are not currently selling. I wish - but there is NO way I would put my house on the market now. Our neighborhood is too glutted with housing inventory! And I fear we would not get a good price. I honestly can't see things settling down for another 3 years or so.

But I do like to keep an eye out on what is happening on the markets in our area. Since it is such an odd unincorporated area, our area was ignored (like guvnah's) for years. Until our area suddenly got "hot" and sprawl began.

I like to spot the trends before something bad (or good) can happen.

And ALL the r.e. markets have been so weird lately as you all know. All this info has been very helpful!!