What Is The Assessed Value Of A Home?

Mar 21, 2022 | Mortgage Guides

Demystifying Home Value: Understanding Assessed Value and Its Impact

Before putting your property on the market, it’s essential to have your house appraised. This process will help assess the current market value of your home, which in turn is influenced by several factors, including data from recent home sales in your neighborhood and the overall state of market conditions. 

County assessors will consider the condition of your land and structure to determine its worth. This assessed valuation of a home plays a crucial role in determining your property taxes. Such taxes are administered by the local taxing authority of the state where your property is located.

Whether you’re considering selling or merely exploring your options, it’s imperative for homeowners to understand what a home’s assessed value is, how it’s calculated, and the consequences of an assessment. Here’s everything you need to know about this essential property-related procedure.

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What Does “Assessed Value Of A Home” Mean?

A property’s assessed value is an estimate of your home’s current worth as evaluated by the county tax assessor within the area where the property resides. Assessors utilize data such as recent home sales, market conditions, and the property’s condition to establish this value.

Every house situated within a specific tax district carries an assessed value. A municipal property assessor determines this value. The estimated value is influenced by several factors: current market value for similar homes in the vicinity, assessed value as determined by the tax assessor, and the worth of the land. 

Though these numbers may differ, both are crucial in determining the final assessed value of the home. This value can vary annually, depending on the assessor’s office data and market interest.

Why Should You Know The Assessed Value Of Your Home?

While most homeowners have their properties appraised to place their houses on the market, that’s not the only reason to understand the assessed value of your home. Here are a few reasons why knowing this value is crucial:

To Get A Home Equity Loan 

As a homeowner, being aware of the value of your property can open up various financing options. For instance, if your home’s value has significantly increased since purchasing it, your home’s equity has likely risen as well. This equity can be utilized to secure a home equity loan. This loan could be used to buy a second property, finance a renovation project, or consolidate debt.

To Sell For A Fair Price

Similarly, nobody wants to sell their property for less than it’s worth or buy a home at inflated prices. A real estate broker’s impartial assessment and market analysis will assist in setting the best and most profitable listing price for your home.

To Plan Your Estate

Knowing the valuation of your properties is essential if you possess real estate that you intend to distribute among your children or family members after your passing. A fair distribution of your estate necessitates an accurate valuation of your properties.

How To Determine Your Home’s Assessed Value

While the tax assessor should furnish you with the estimate, there’s also the option to calculate it yourself. Below are two simple formulas you may use:

Property Tax Bill x (100 / Tax Rate) = Assessed Value

If you know your property tax rate and how much you owe in taxes, you can use this formula.

For instance, suppose your local property tax rate is $5 per $1,000 of the property value (or 0.5), and your property tax bill is $4,000. When you multiply $4,000 by (100/0.5), you’ll obtain an $800,000 assessed value.

(Market Value x Assessment Rate) / 100 = Assessed Value

In the case of the second formula, you need to know the property’s current market value and the assessment rate. This rate is a percentage that factors in a series of conditions that could boost or reduce the value of homes within a specific location. 

For instance, if your property’s market value is $400,000 and the assessment rate is 85%, the assessed value would be $340,000.

Assessed Value vs. Appraised Value vs. Fair Market Value

While these terms may sound highly similar, they differ in specific ways. Below are the key differences:

Assessed Value

  • The tax assessor’s estimation of your property’s value
  • Determining home value serves the purpose of property taxes
  • A municipal property assessor

Appraised Value

  • Estimate of the property’s current market value by an appraiser
  • Determines the current market value of a property by contrasting recent comparable sales, often required for lending purposes.
  • A professional appraiser

Current Market Value

  • Your home’s most likely selling price is based on sale prices of recent comparable sales
  • Determines the current market value of a property
  • The seller and the seller’s real estate agent may be able to negotiate with the buyer

How To Dispute A Property’s Assessed Value

Your home’s assessed, and market values can significantly impact your personal finances. So, what if you believe your property’s appraised or assessed value is incorrect? 

Here are some strategies to challenge the assessed value of your property:

  • Check the information that the local taxing authority has on your house. Ensure all details (e.g., size, bathrooms, etc.) are accurate. If there are any errors, contact the tax assessor’s office to address them.
  • If possible, compare your tax assessment to your neighbors with similar homes.
  • Have a third-party professional reassess your home. 

If you still believe your property is inaccurately priced after reviewing all of the data, register a complaint with your local assessor’s office and request a reassessment.

Summary

The assessed value of your home is recalculated annually. As a responsible homeowner, it’s crucial to stay updated about the value of your home. Knowing the current market value is essential if you decide to sell your home, and knowing about it is also beneficial for estate planning purposes.

For more insights and advice, feel free to contact Wesley Mortgage at the link below or this number: (888) 407-2102

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