One of the most commonly asked questions in real estate, and sadly,One of the most inaccurately answered.
One common misconception of homeowners is to base a homeâ€™s value on the list price of other homes currently on the market. The obvious flaw with this concept is that a seller can ask any amount of money they want for their home, that doesnâ€™t mean that a buyer will buy it, or that a lender would be willing to finance it at that price.
Another erroneous method of many sellers is to determine their propertyâ€™s value based upon what was paid for the property, how much they have invested in improvements, and what kind of profit they would like to make. Unfortunately, there are many homeowners today that bought at the height of the market and now find that their property is no longer worth what they paid for it. This is a painful reality for many homeowners who struggle to accept the current value of their property.
The real barometer of current value is what recent buyers have been willing to pay for similar homes in the same area as the seller.
As a certified appraisal will demonstrate, the true and current market value of a property is based on what similar properties in the area have been selling for in the past 3-6 months. An appraiser will compare the subject property to recently sold, similar properties, making many adjustments for square footage, lot size, age of home, construction materials, number of garage bays, the list of adjustments and criteria is extensive.
A certified appraisal is what the lending institution will order when a home buyer applies for a mortgage. The lending institution needs to be assured that the property which will be collateral to secure the loan, is actually worth the loan amount in case the buyer defaults.
Many a disillusioned buyer and seller have agreed upon a price only to find that the appraised Value could not support the sale price and the deal could not be consummated, because the mortgage could not be obtained.
How could this frustrating situation have been avoided you ask? I bring you full circle back to the two most commonly asked questions
Seller: â€So, how much do you think my house is worth?
Buyer: â€œHow much do you think we should offer on that house?â€
The responsible answer from any reputable Realtor should ALWAYS beâ€¦
â€œI wonâ€™t know until I create a Comparative Market Analysis (CMA)â€
While a CMA is NOT a certified appraisal, a thorough and well done CMA created by a proficient Realtor will establish a good estimate of the current market value. A strong CMA can give both buyers and sellers a close idea of current market value, and allow them to make informed decisions based on facts; not arbitrary thoughts or personal opinion.
If you will be asking one of these two important questions of a Realtor, make sure that their answer is backed up with a CMA. If itâ€™s not, find another!
Please feel free to call me if you would like a CMA on your property.
Castle Gate Realty
Now, enter in the fact that beginning in 2003, Lehighton School District starting "appealing" tax assessments of properties that were recently sold. They would take the sale price and divide it by 2 to get the assessed value. i.e. assessments were equal to half of market value. This caused the taxes to increase dramatically for those properties that were sold and reassessed using this equation. The change was so drastic, as a matter of fact, that certain homeowners fought it all the way to the PA State Supreme Court. They also raised public awareness of what was going on. Lehighton School District (and Palmerton) stopped appealing the tax assessments of recently sold properties since then. Jim Thorpe SD as well as Panther Valley SD continue to do so.
Finally, let me explain the 2.33 and where that came from... After the school district appeals went on for quite some time, they realized that in order to be more fair, they needed to use a "state-wide multiplier" when reassessing the sold property's new taxes. They call this mulitplier a "Common Level Ratio". It changes from year to year and has recently changed to 2.1. 2.1 is VERY close to half of the sale price (remember, half would be 2.0).
You cannot determine your value based on the assessment multiplied by the common level ration because your assessment is most likely not current.
However, when a house sells in Jim Thorpe lets say, they will take the total millage multiplied by the common level ratio to get a "multiplier" that will be multiplied by the new sale price to determine taxes. i.e. If a house sold in Jim Thorpe Boro for $200,000 and they took the current millage x the common level ratio of 2.1, the new taxes would be assessed at $5,362.
Please don't hesitate to call me for further discussion on this topic. 610-393-2536
The best way to get current market value before appraisal is to have your Realtor do a Comparative Market Analysis (CMA) on the property using SOLD comps within a 1 mile radius of the property (the closer, the better) that have SOLD within the last 3 months. This will give you current market value. Most (if not all) Realtors will NOT charge you for this service.