William: There are three home valuations. Tax assessment, Appraisal and Competitive Market Analysis (CMA). The tax assessment, in NJ, is supposed to be at 100%. Since it costs money to do a town, it's rarely done more than once every ten years. Do you think that prices may change in ten years? Some towns can do "spot" assessments but that is not a common thing. The town really doesn't care, because the tax burden is simply divided over the assessment, each getting a share based on a value. After a while this can result in better neighborhoods getting less of the burden than those which are not appreciating. Hence the ten year re-assessments. The CMA and mortgage appraisals may differ because they are done by different entities but in the end, if the house does not appraise, there will be no mortgage available for it. CMA's help sellers set the list price but they can ignore them and ask more, if they choose. A buyer's agent can do a CMA and it can guide buyers to what the going rate is in the area.

In NJ property assessments are determined by the municipal tax assessor. Your assessment is the basis for your annual tax bill. Combine all taxes, county, municipal, school, fire districts if you have them, and special assessments and multiply that toal times the assessment.

The assessment is, almost always, less than the sale price. Revaluations are generally done every 10 to 20 years in most municipalities. The town can decide to do it, or the town may be ordered to re assess by the Division of Local Government Services in the Department of Community Affairs. Before the real estate market went wild a few years ago, the Division would considered an ordered revaluation if assessed values dropped below 80% of real market value.

Make sure the property you are looking at is properly assessed...by that I mean that no additions or work to increase the value of the home has been undertaken or completed without permits.

Also, check to see when the last municipal revaluation was completed in the community. The revaluation sets the assessments. If it has been more than 10 years, ask when the reval is planned.

Good Luck!

Hi William,

You can ignore the assessment. It has little to do with the market value of a property. As long as the property taxes make sense with what you are seeing in the neighborhood, you can move forward. You cannot calculate the assessment yourself, it is calculated by the tax assessor using internal formulas. You shouldn't worry yourself with it, it is irrelevant to your purchase decision.

-Marc

William, you can check on the assessment value at your local tax assessors office. Here in Maryland, our assessments run at about 70% of current market value, but that can change. Almost always you will pay more for a house than it is assessed for, but obviously not more than it appraises for.