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Joe Houghton, Real Estate Pro in Minneapolis, MN

What are some ways other agents help explain to clients that the assessed value by the county is not the true value of the home in question?

Asked by Joe Houghton, Minneapolis, MN Fri Aug 27, 2010

Tax assessed value?

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I agree with prior posters - market analysis using good comps is the best way to discuss pricing. But the question around market value and township assessement comes up increasingly and so I do think it is wise to let your sellers know that you are apt to have buyers include this criteria among their evaluation measures. I agree that there is not a linear relationship between market value and township assessed - if there was, then buyers could just report to town hall and order up a 123 Main Street. Having said that, I do think you can draw some correlations among similar homes....for instance, if comparable homes in the same neighborhood are listed in a 105 - 108% of township assessed value, and your home is listed at 125% of township assessed, it is worth reflecting on it to be sure it makes sense/is explainable. On the buy side, I just had this very discussion with a client that was having second thoughts on the price they had negotiated - comparable homes had closed very recently at something like 108-115% of township appraised and our accepted offer was 1-4% of township assessed. Looking at this fact provided a level of assurance to my buyer that he had negotiated a fair deal.
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Fri Aug 27, 2010
Hey, Joe!
OK, here's the thing, the tax assessed value is only 1 aspect of determining real market value of a property. These days, they are very unreliable. One answer here suggests that the tax assessed value is usually more. Well, not too long ago, it was always less!! And, the percentage above or below varies, too.

I explain to buyers and sellers that the county/city/municipality still needs to pay their bills regardless of where property values are. So, the assessed value at which the property is being taxed is set at that amount so the county/city/municipality can meet their expenses. Now, this doesn't mean that property values in the same area should be all over the map, but it can vary a bit. I always encourage home owners and buyers to do a little research on their own with the city/county/municipal taxing authority to find out what the tax capacity rate is and what formula they are using to determine tax rates.
1 vote Thank Flag Link Fri Sep 3, 2010
Great question, Joe! Comps and sales data are the key here - however, the process of market valuation has become far more difficult recently due to (1) a lack of sufficient sales in many areas to generate a valid statistical report on prices, and (2) the dual-values of properties which are not REOs and those which sold as foreclosures/REOs. It's much harder for an agent to determine an accurate market value when those two issues are part of your market analysis in the area of the subject property.

Once you do establish a range for a market price, show the client that the tax values on other sold properties - and the relationship to selling price. You should be able to demonstrate to the client that taxable value has little worth in determining selling price and dismiss the term from future discussions.
1 vote Thank Flag Link Fri Aug 27, 2010
There are many different ways to determine the value of a home. The tax value is that which the local government sees what a home is worth for (wait for it..) taxing purposes. The appraised value is what a bank think a home is worth in case they will eventually get stuck with that asset. The most important value interpretation, as far as home sellers are concerned, is the market value. The maket value is what a buyer in today's market will be willing to pay for a home. While these values don't always jive with each other, it is very important for a seller to understand that they need to price their home according to what buyers will find it is worth. Remind them that the city isn't planning on buying their home. Neither is the bank.
1 vote Thank Flag Link Fri Aug 27, 2010
Simply explain what the county assesses you at has nothing to do with the true market value of the home.

The home is a commodity just like a loaf of bread. It is only worth what someone is willing to pay for it.

Make it that simple because that's what it is.
Web Reference: http://fglick.com
1 vote Thank Flag Link Fri Aug 27, 2010
All the answers may confuse you. It's really simple. An Appraisal will not ever consider the tax assessor amounts, period. There are errors on taxes, homesteads, improvements that the assessor has not discovered, either permitted or non-permitted.
Taxes are never considered in appraising the value of property.
Web Reference: http://www.sopactitle.com
0 votes Thank Flag Link Wed Nov 17, 2010
Joe-just met a guy who does tax appeals and he provided a calculation on tax value is worked out. I have his materials and would be happy to share this calculation with you. Email me should you want to see how it works

sfarleym@gmail.com
0 votes Thank Flag Link Wed Nov 17, 2010
The best way is to get a prinout from the county of the assessed value of a property from your agent. Then have your agent do a market analysis based on comparable sales in the last 3 months. Where I live in Sioux Falls, South Dakota, the assessed value is almost always less than market value.
0 votes Thank Flag Link Wed Nov 17, 2010
The sales value of a home is best determined by what buyers are paying for homes similar in style, location, square footage, amenities. The tax assessed value is typically higher than the sales value but not always. This depends on how recent the city has assessed homes in the area. Sellers should have a professional market analysis done by a full-time real estate agent who understands the community they live in.
Web Reference: http://www.KimSellsMN.com
0 votes Thank Flag Link Mon Aug 30, 2010
I always approach it this way. There are 3 values to any home. The assessed value, which you want to be as low as possible, because this is what your taxes are based on. then their is the appraised value which we want to be high so we can get a loan on the house. The actual purchase price will typically fall some where in between.
Of course these days you can see just the opposite of what I described due to the lag time of assessments.
Web Reference: http://HomeByFriday.com
0 votes Thank Flag Link Fri Aug 27, 2010
Hi Joe, thanks for the "best answer" vote of confidence - glad to have been helpful. See you around the site!

Best,
Jeannie
Web Reference: http://www.feenick.com
0 votes Thank Flag Link Fri Aug 27, 2010
I understand re-evaluation of individul property tax values are assessed about once every eight years in the form of percentage. The increase in property taxes are a major source of revenue for local governments. Local boards conduct budget hearings about once a year and come up with a number. The tax rate is determined by dividing the board's total taxes by the toal assessed value of the jurisdiciton. The funds are used to improve public facilities, schools, sewers, fire stations, hospital, parks, road, bridges and the list goes forward.

If the county is assessing taxes on properties that have not been re-evaluated within the past three years, then there is a good chance the home owner is overpaying property taxes. Values have declined, and any home owner can dispute their property tax value with the county and potentially get a reduction rather quickly. The agent can assist by submitting a good home market analysis to accompany the dispute. Sold properties will determine a good value related to the subject property. I hope this helps?
0 votes Thank Flag Link Fri Aug 27, 2010
By showing them recent comparable sales and how those prices compare with the tax assessed value.
Web Reference: http://www.golftobeach.com
0 votes Thank Flag Link Fri Aug 27, 2010
Show them the sold data around there home.
0 votes Thank Flag Link Fri Aug 27, 2010
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