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Tax Assessed Market Value: An assessed value is the dollar value assigned to a property to measure applicable taxes. Assessed valuation determines the value of a residence for tax purposes and takes comparable home sales and inspections into consideration. It is the price placed on a home by the corresponding government municipality to calculate property taxes. 

If you think real estate tax assessed value and real estate fair market value have any correlation to one another then you are wrong! As you read further you are going to discover the difference between tax assessed and fair market real estate values.

In fact some of the biggest perpetrators who misuse this information are real estate agents!  Over the last twenty seven years while working as a South Carolina Realtor and Property Manager, one of the misconceptions that I routinely come across is people who like to draw a definitive correlation between a homes tax assessed value and it’s fair market value.

Let’s set the record straight folks – there is very little correlation in most circumstances between the two figures.  

Often times the general public gets confused about this because a number of agents fail to educate their clients that there is a big difference between an tax assessed value vs fair market value. Looking at tax assessed values is about as good as using Zillow.com to figure out what a home is worth! If you have done any research on Zillow then you know how inaccurate their home values can be. Rely on an experienced Real Estate Agent for proper Market analysis and Comparables, not Zillow, I repeat, not Zillow.

When the tax assessed value the town places on a home is higher than what a property is on the market for you will often see an agent advertisements that say something like this “Come see this bargain home that is priced $100,000 less than the tax assessed value”. What this immediately tells me is the agent either is not educated on property valuation or they believe there will be someone ignorant enough to think the home is the bargain of the century. Someone that knows better will be realizing the property has been over assessed by the town and the seller has been paying too much taxes!

If more agents did a better job of teaching the public about the difference between fair market value and tax assessed value there would be far less confusion. Buyers would never be trying to correlate tax assessed value to the Real Estate market value.

In most cases tax assessed values are a worthless piece of data when figuring Real Estate Market Values.

In theory this should be the case but tax assessed values are nothing more than a yard stick for a municipality to collect an appropriate amount of taxes to sufficiently cover the state and local appropriations chargeable to the city or town.

So what this means is the town is going to need to get “X” amount of money every year to run the municipality. If market values of homes are dropping assessments will eventually catch up to them but in the meantime towns will increase the tax rate as necessary to ensure they still get the funds necessary to cover their budget.

You also need to remember that the tax assessed value of a home often lags the market because the valuations are not re-calculated until the beginning of the next calendar year. So if the market value of local properties are declining, it is not unusual to see the assessed value being higher.  Likewise if values are heading up it could be just the opposite.

I have seen two homes built by the same builder side by side where home “A” was larger and had a bigger lot than home “B” yet home “B” was charged more in taxes due to a higher tax assessed value. This should never happen but it does!

Homes that have re-sold more recently will usually have a more accurate correlation of their market value vs tax assessed value than a home that has not sold in a long time. For example, a home that sold a couple years ago usually will have a stronger correlation than a home sold fifteen years ago.

Another example of how tax assessments can become slightly skewed is the home owner who feels they are being over assessed by the town, files a challenge, and wins an appeal. Their assessed value is now changed to the lower value.

Does every other home owner who has a similar property get a notice in the mail saying their properties assessed value will also be coming down courtesy of the research done by Mr. Smith who lives down the street? If life were only that grand! This is the perfect example of the squeaky wheel getting the grease.

What is Fair Market Real Estate Value?
So how do tax assessed value and Real Estate market value differ? The fair market value of real estate is what a buyer would be willing to pay for a property on the open market with no undue influence. In real estate the term “arms length transaction” is often mentioned. An example of a non arms length transaction is when a family member buys a property at a discount to what it would be sold for otherwise.

As a homeowner the way you determine real estate fair market value is by looking at what other similar properties have sold for in your area. Typically the sales must have occurred in the last six months in order to be considered a comparative sale. Anything longer than six months lenders and appraisers will not look at. The homes should be of similar size, style and characteristics.

Either a competent Realtor or an appraiser can determine your homes real estate value. Keep in mind the word competent. Like anything else evaluating the fair market value of real estate is a skill.

One other additional thing to keep in mind. A properties appraised value is not necessarily the same thing as when a real estate agent provides a fair market value or comparative market analysis. An appraisal is conducted by a certified appraiser. This is done in a real estate transaction where the buyer is getting a mortgage. The lender wants to make sure that they are lending money on a property that has a value equal to or greater than the purchase price.

An appraiser will also be asked to provide market values for properties when homeowners are looking to re-finance into a new mortgage. Theoretically the fair market value and appraised value should be relatively similar. When appraisers and real estate agents determine market value they both use comparable sales data to arrive at a definitive property value. In essence these two figures are nothing more than opinions of value. They should however be based on previous sales data that a reasonable person would conclude is substantially similar.

Challenging a Tax Assessed Value

Sometimes a homeowner will purchase a property for X number of dollars. Later after getting their tax bill they feel the tax assessed value is way out of line vs the actual fair market value. No surprise there as it happens all the time!

So what should you do if you think your assessed value is out of line with other similar homes in your neighborhood or town?

Yes you can change that tax assessed value, however, be very careful trying to appeal and raise your property's tax assessed or tax market value thinking you will be able to sell your home for more  money as it may impact you adversely. I highly recommend that you seek a real estate attorney's advice before attempting such an appeal.

Conclusions on Tax Assessed Value vs Real Estate Fair Market Value
In summary an tax assessed value is the valuation placed on a property by a public tax assessor for purposes of taxation. Fair Market Value on the other hand is the agreed upon price between a willing and informed buyer and seller under usual and ordinary circumstances. It is the highest price which the property will bring when exposed for sale on the open market to a buyer who is purchasing with full knowledge of the properties highest and best use.

Hopefully after reading this you have figured out that a tax assessed value has nothing to do with Real Estate fair market value.

Other resources concerning real estate valuation worth a look:
What is the definition of assessed value in real estate via Investopedia.
One of the top home selling tips you will find regarding the sale of property is pricing it correctly!
What is the fair market real estate value by Wikipedia.com.

Bottom line:  Call me, email me, or text me to get an experienced agent comparative market value for your home. 864-207-2111 

The above information is intended to serve as a broad overview for educational purposes only and is not intended as legal advice.  If you need legal advice you WILL be referred to a Real Estate Attorney.

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