You may be wondering, “Why is this home assessed so much lower than the seller is asking for?” Well, the answer is a little complex. If you want to fully understand a home’s value compared to its assessment value, you’ll need to know a few things…
What Is Appraised Value?
This dollar figure refers to what a property is really worth. Generally speaking, an appraised value is what a buyer is willing to pay for a particular home at its sale. A home’s appraised value can also come from a home appraiser, usually hired by a mortgage company to determine the value of a home (for example, when refinancing a mortgage).
What Is Assessed Value?
Assessed value is a separate number. It’s what a municipality believes a home to be worth. Essentially, it’s a guess. It’s used for tax purposes to determine how much they may be able to tax a homeowner for a particular property.
Assessed Value vs. Appraised Value
Usually, people expect for there to be a direct correlation between an appraised value and the assessed value, thinking that these numbers should be the same. However, the assessed value of a home could be incorrect or imprecise for lots of different reasons:
- Tax assessors typically don’t walk through a home in order to determine its assessed value. So, the individual responsible wouldn’t understand whether the bathrooms are brand new or from the Victorian era.
- Homeowners will often challenge their assessed value in order to lower their assessment. Why? This can help lower total taxes on the property, which helps lower their financial burden in taxes. It’s worth keeping in mind that a low assessment doesn’t necessarily mean that the home is worth less to buyers, or that it will be appraised for less money.
- Older homeowners may have larger assessed values on their home. Over time, property assessments will go up, and unless homeowners are able to challenge it, the assessed value will likely rise over time.
So why bother looking at the assessed value at all? If it doesn’t indicate what the property is actually worth, then is it just a waste of time to look at a property’s assessed value?
Absolutely not! You need to understand a home’s assessed value in order to make a smart purchase. It can help you determine how much you’ll pay in property taxes while you own the home. A property that has a higher assessed value than appraised value could wind up costing you more in taxes than you bargained for! You may wish to challenge your assessment to pay less in taxes overall. Or, you may have a higher appraised value than your assessment – keep an eye out for a higher tax bill in the months to come!
It’s worth noting that an assessor won’t just reduce their assessment value because you said so! You’ll need to challenge the tax assessment, and may be able to pay less in taxes over time if successful. But that’s a blog for another day.