Assessed value: what the city uses to compute property taxes. Almost nothing to do with...

Appraised value: obtained through an appraisal ordered by the buyer's lender which I think usually looks at sold (market) prices for similar properties in the area.

The lender will not lend more than the APPRAISED value but the appraised value is often higher than the assessed value of a property.

I think cities typically tend to have high property tax rates and low tax assessment values - that way they still get their money but it's hard for homeowners to argue their assessment is too high since it's usually well below market rate.

Both are moot if the buyer doesn't need a mortgage, the buyer can then pay whatever he or she wants.

This post was edited by robotropolis on Wed, Oct 15, 14 at 12:21

In my area the assessed value has nothing to do with the actual (or appraised) value, simply because there's a cap on how much the assessed value can go up per year. So, people live in 2 mio properties that are assessed at 650K.
The only time the assessment value changes substantially is after the house has been sold --- then the assessment goes way up. Bad for the new buyer.

Well this is good to know. I was just looking at comps. Two houses exactly like mine (same exact house built same year literally one block or less over) sold for 192-195 respectively within the last two or so weeks. BOTH these houses were in need of 100% rehab. One almost a tear down in my opinion. My house is a million times better. Only difference is I converted my garage into a huge room with massive walk-in. My house also has a high end kitchen (every bell and whistle) and also we built a gorgeous porch, large and fancier than any other in the area. We also put in french doors and a deck and none of those homes had those. Oh and I put in a shed as well to make up for the garage storage lost. I don't see the porch, deck or shed on the appraisal either. Yet my relator wanted to LIST at 191. I also had my driveway repaved, have a new roof, tankless water heater, new grass, new electrical system, new white fencing front and back., crown molding in every room. the list just goes on and on. These houses had little to none of that. I KNOW I can get 225 at LEAST for this. Another ranch style, sold 215k last week same size as this. Only in not nearly as nice. I'm now thinking I need to talk to my relator or find a new one? Can I get an independent appraisal? Or how can I handle it so people can judge more accurately than it is now? She said 191k but I think that was her guess!

I agree with the other posters. I dont believe that assessed value trumps appraisal. My grandmother's old ranch house sold for a few hundred thousand more than the assessed value. It was a standard sale and I dont believe the bank would loan anyone money for a property they thought was over-valued.

Also, the banks often order the appraisal. I have never heard of them caring about the assessed value. If the assessed value held any weight, I dont think they would order the appraisal. But that's just my limited experience.

This post was edited by rockybird on Wed, Oct 15, 14 at 13:09

to nosoccermom. Thanks. Yeah, that's what I'm thinking. House I want is appraised at 600k+. I can get it for 400k or less. It's listed at 400k and has been on the market for a long time. It's brand new. Problem about it is it's FAR from civilization! That and there's not much in the back yard except two small decks and a fire pit. Not good for those with dogs or kids even if on 1/2 acre. The rest of it is wooded and unusable really. But for me, it's perfect. Less to care for. You have to drive 35 minutes to get to a wal-mart and there is only a handful of restaurants nearby and none particularly appetizing.. But I speculate they're building in the future. I think this is a smart real estate choice. But I see what you are saying; selling it later I'm sure I'll make some nice money off it. But the new buyers might be daunted by the taxes they'll have to pay!

Assessed value is not correlated to the fair market value or the appraised value. Banks do not look at assessed value, ever. They look at the appraised value.
If the house that you are looking at purchasing is listed at $400,000 and has been listed for a very long time like you say, then I can guarantee you that it is not worth anywhere close to $600,000. Maybe not even $400,000.

It was a new Home show home... a lot of them are not selling because they are so far out from civilization. There's a ton of 579-1.3 million dollars homes in that community not selling! I guess they built it a year ago (almost exactly) and it's been on the market since. Nobody's lived in it. Doesn't hurt asking the relator to go in at 350. Worst they can say is NO. They'd be losing money at this point for sure.

Believe the driving distance is the only issue for the stalled sales, rather than checking for other issues, at your own peril. Is this an HOA community? The developer usually has control until a certain percentage of the homes have sold. If sales don't go as the developer planned, there can be serious financial problems for the HOA, and the homeowners. The provided link gives some food for thought if this is an applicable situation.

Here is a link that might be useful: Underfunded HOAs

Wow, thanks for the PDF. I'll finish reading it. Is that a general over the board thing? Cause I see that's CA and I'm in VA. Yes, it was an HOA community but fairly low fees. I think they were under 100 a month. Before I decided, I'll read this fully. I had no clue about this topic... never is covered on HGTV! They should have a show that discusses all the stuff we have asked here.

It isn't just a CA issue. Areas where there was a building boom, followed by a market bubble bust, had so many HOA/developer problems that it drew a lot of media attention: Las Vegas and Phoenix, for example.

In our area, taxes are a percentage calculated on 80% of the market value. So, if the market value of a home was $100k, the value for calculation of taxes would be $80,000.

If we were selling and a buyer submitted an offer based on our home's tax assessment value, the offer would go straight into the trash.

I'd be very cautious of buying in an outlying area with high prices and high vacancy rate. I don't know what the market is like there, but here in the Phoenix Metro area developers went wild during the bubble. Houses sprang up like mushrooms far from the metro center (sound familiar?) and prices were astronomical. When the bubble burst, all the buyers were upside down; foreclosures and short sales were the order of the day and people walked away with nothing. These areas have still not recovered.

If the area you're considering has not yet been developed, i.e., no Walmart, no restaurants, no shopping centers, that's a good sign it has not recovered and businesses are not willing to gamble on it. I wouldn't gamble on it, either.

Perhaps you need to talk with more than one realtor for advice. That includes getting good comps and asking what you can expect to recover from all your improvements. You don't always get out what you put in. If your improvements were not permitted by the city, they may not be counted in an appraisal.

Btw, if your 'appraisal' was not ordered by a lending institution/bank and performed by a licensed appraiser hired by them, then you don't have a bona fide appraisal. Unless.... you hired a certified appraiser yourself. And that likely would not be accepted by a bank issuing a loan to a buyer.

For all of those DIY home improvement projects, were permits pulled? If not, then I guarantee that it will bite you. People have become very leery of issues like that, and it can devalue a home rather than give any added value.

dahoov2,
If your house doesn't have a garage, you have eliminated many buyers.

Rrah... good information. But my statement that assessed value is not correlated to the appraised value stands, because an appraisal or an assessed value is only a true value of that property for that one moment in time. After that very short time, both are worthless. Markets can change, properties can be devalued or the values can be enhanced, and so on. But the assessed value will not reflect these changes for quite some time, no matter what the state laws are.
I should have gone into more detail like you did to explain what I meant.
OP... you keep telling us that the only reason the home has not sold is because it is so far out from any retail. And that may be true. But, that one factor is playing a major role in its fair market value. it is worth what it is worth, no matter the reasons. Like I said before, you may not know just what the fair market value is, but you and I know what it is not worth... It is not worth $600,000, or $500,000, or $400,000.
And the fair market value also has nothing to do with how much it cost to build.

....or how much it sold for 5 years ago or 2 years ago...or 1 year ago.

Here's the problem that I see from your other post:
"I was thinking I could spend 150k and build a master bath, walk in closet, put the laundry upstairs and move my door in the bedroom over to accommodate a queen bed, build a patio and fix the shower in my other bath, so satisfy all my hates about the house."

All those things you hate about your house? A lot of buyers will hate those things, too.

And you no longer have a garage which is a huge $$$ reduction and leads to two issues even if it was properly permitted: (1) no place for a car in the winter - assuming that the shed you mention for storage won't hold a car (2) garage conversions almost always look like garage conversions - there is a step-down, awkward window placement, driveway to nowhere, siding differences, etc. And the inside often has poor lighting, poor HVAC, poor flooring,
etc.
Yours might be gorgeous, but the lack of room for a car seriously devalues your home far more than the crown molding and a big deck will add.

The garage conversion looks like the house. We got matching bricks and a bay window; there was no siding difference; none was needed. Drive to nowhere serves to park two cars. It's not an eyesore. It doesn't snow here more than one day a year or so. We talked to the relator about the conversion. She said in this area it doesn't matter as much; mostly because people looking for a garage won't even go to view the house if that's on their wishlist. So your pool of buyers that would come in, it is not a deal breaker. She pretty much said it's half and half. Half the people would rather have a garage (ours was a ONE car anyway. Not big enough for a car and a work area/storage etc. Duct work was low in there couldn't even put cabinets on the wall), while the other half would rather have what we did (pretty much is a second huge master suite). We use it as an exercise/game room with a ginormous walk in where we have built ins, a freezer and store my granddaughters bike and hubby's golf clubs. The built-ins include two pantries hold every tool, paint and all those sorts of things. Another bank of cabinets hold extra food, water and stuff like that and a freezer. I re-purposed my circa 2000 oak cabinets from our old kitchen to do it; (used all but four cabinets) and it looks great. Put some butcher block on the top of one wall of cabinets. Use that for projects. I should post a photo but don't know how to do that

Appraised value and Assessed value are correlated...but there are a number of reasons they could be off. (ie states where property values skyrocketed but the law limits the yearly increase.)

Keep in mind that you rarely get back all the money you put into home improvements. The people willing to pay a lot in your area may want to spend a lot on a shiny new home. Your house should still be worth more then the junkers...say, add half what you put into improvements to the cost of the comps that resembled what your new house started out like.

Distance from everything can add up...a million little errands take more time, eating away at your day. How is your commute? How old are your kids?

On the other hand, i don't find woods unusable....much more interesting then a field of grass.

I agree with Gyr_Falcon. If it hasn't sold, check out the HOA. Also check for shoddy construction/leaking etc.

You said, "Two houses exactly like mine (same exact house built same year literally one block or less over) sold for 192-195 respectively within the last two or so weeks. BOTH these houses were in need of 100% rehab. One almost a tear down in my opinion."

If I have $225,000 to spend, obviously I'm not going to buy a house in a rundown neighborhood if I don't have to.

The neighborhood is not run down; it's just older. But in a way, it's better I personally think than the new development they put in a few miles down the road; houses there built cheap, right next to one another and remind me of military housing or projects. Every fixture is lowest builder grade material and they are going tor 300-370s. Eeek. All houses are a variation of beige and there's only like three plans and nothing to make them look different from one another. I'd rather stay in this older area now after seeing that option!

As others said, the tax assessment value is not necessarily related at all to the market value.

The tax assessment value on my home is about $80K below the sales prices in our development in 2014.