Homebuyers and sellers often rely on the assessed tax value to know how much a house is worth.
Assessed value does not equal fair market value.
In spite of municipalities’ efforts, a property’s “assessed value” (used to calculate real estate taxes) can be quite different from its “fair market value” (the likely price that the house would sell for today). This is in spite of a law requiring that the two values be equal.
Here’s an example from our Western Hanover neighborhood:
House A: Assessed value = $340,500 (bought five years ago for $355,000).
House B: Assessed value = $248,000 (bought last fall for $225,000).
House A’s market value is likely higher than its assessed value; House B’s market value is likely lower than its assessed value.
“Comps” are the best measure of value
Real estate professionals agree: the best indicator of a home’s value is what similar homes have recently sold for. By comparing similar homes, in similar locations, using a similar time frame (usually the last 6 months), the “comps” are truly the best source for arriving at a home’s fair value.
How do I find the “comps”?
While many folks use Zillow, their computer-generated “Zestimates” do not include human intervention, which can lead to gross distortions in their numbers. Why? Because machines cannot adjust for subtleties in location, upgrades and other factors. Choosing the best homes for comps requires a person familiar with the area and the particular home.
For a full-blown estimate of your home’s value, hire an appraiser. These licensed professionals do in-depth comparisons of comps and other factors to arrive at the current market price. (For recommended appraisers, contact us or download our Homekeepr App.)
Another option is to ask a qualified Realtor to provide you with a Competitive Market Analysis (CMA). Most agents (including us) would be happy to provide you with a ballpark estimate to help you decide whether to make a move. This number will be fine-tuned when you actually list. When you are buying a house, your buyer’s agent should provide you with a CMA for any home you are considering to help you decide on an appropriate price to offer.
Determining a home’s value is an art as much as a science. It would be convenient if we could rely on the tax assessment for a property’s true value, but we can’t. Hire an appraiser, or enlist the help of a Realtor for the most accurate estimate.