That was then, house prices rose incredibly high. Now prices have been seen falling towards reality. Knowing that assessments are in line with historical norms of pricing many look at them to see a reasonable bubble free price of a house.
realtors do not like this, but it is a fact. prices now are still to high. tax assessments were based on reality before bubble pricing came along and make a lot more sense than a cma since prices will drop further.
The market drives assessment, not the other way around! I wrote about it awhile back:
See you Friday!
Crossroads Realty-Executive Office
Knowledge is power and the Internet has provided buyers with a lot of information that was not so readily available even 7 years ago. Unfortunately, many buyers don't know/accept that they may need help to interpret the data inorder to use it effectively.
In Livingston, prior to the reassessments, we used a ratio in regard to assessment versus sale price. At the height of the market, homes were selling for around 10 times the assessment number. Prior to the recent revaluation, they were selling in the 8 times range. Updates and condition factor in, of course.
In Essex County , after many years of outdated assessments, the entire county is in the final stages of reassessing all homes. This does involves visits to each and every home when possible. There is a large appraisal company in the state who is handling this, and following up with home visits.
Believe it or not, Livingston was last reasssesd in 1976! As of now, the new assessments are an indication of market value - to a certain extent. I am finding many homes are selling within a few percentage points, in either direction, depending on the condition of the home. Someone who had an original kitchen, and just renovated it AFTER the new assessment, did well, as their assessment - and taxes - are now based on the older kitchen.
Again, this isn't written in stone, and the final sale price may vary, but up till now, the actual assessment in the towns I cover, for the most part , did in no way reflect sale price. You needed to know what the ratio was in order to calculate "value". Asa former math reacher, I loved playing around with the numbers - the new assessments make the calculations easier - for now.
As one year flows into the next year and the market changes, moving forward, these "new" assessments will have less of an impact, but while they are new, they may tend to reflect current value.
Nothing beats comparable sales, however, when looking to determine current market value.
Prudential NJ Properties
Beware that many towns do not assess to current market value while others reassess only infrequently. In both cases, the assessed value cannot be used as a proxy for true market value.
But here's the rub. Assessments are not based on physical inspections, but on square footage when built or added onto; improvements that required permits and are thus known, etc. This results in homes, sometimes side-by-side, with very similar assessments but one nicely updated and fresh, while the other is tired and in needs of a lot of expensive work.
So why are some buyers focused on this? Because the market is rising, and assessments are lower than the current prices. So the assessments becomes a lever in negotiating. When prices were still dropping and assessments were way too high, the sellers refered the assessments to support their prices.
In reality, buyers are smart and want good value. If they see a home they want to live in, they will ultimately pay market value, that price at which the buyer agrees to buy and seller agrees to sell.