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Nosey Neighb…, Both Buyer and Seller in 07920

Why are buyers so focused on tax assessment? How come this was not even a concern 7 years ago?

Asked by Nosey Neighbor, 07920 Fri May 21, 2010

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7 years ago we were in the middle of house prices jumping higher and higher. It did not matter what the assessment was as buyers bought figuring prices would rise incredibly fast forever.

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.
2 votes Thank Flag Link Fri May 21, 2010
Hello there, Nosey Neighbor,

The market drives assessment, not the other way around! I wrote about it awhile back:

http://basking-ridge-real-estate.com/blog/basking-ridge-real…

See you Friday!

Jen
0 votes Thank Flag Link Tue Oct 5, 2010
Easy access to the numbers and it's FREE. People seem to think that this is the end all price that their house is worth. Each year they are either looking to lower this amount to save on taxes or crossing their fingers that it goes up-thinking that they instantly gained equity. Unless a person has recently sold their house they tend to forget about the fact that these numbers are only what the city sees their house worth and not based on actual sales and quality.
0 votes Thank Flag Link Mon Oct 4, 2010
NN,
You can google Bernards Township equalization chart or call the local tax office for the rate.
Celia Szieber
Crossroads Realty
732.597.0060
0 votes Thank Flag Link Mon Oct 4, 2010
Celia - where exactly would you look online for the equalization chart for Bernards Township NJ? Is it something that the town publishes or this just a standard table?
0 votes Thank Flag Link Fri Oct 1, 2010
The tax assessment is an estimated value placed by the town where the property is located. In my opinion. tax assessments are not always an accurate source to determine value. Updates and condition also play a factor in determining value. Anyone can go online to find the equalization chart for the town where they live. This chart will give you a ratio, comparing the assessment to true value. Example, Property X is located in Town X where the equalization rate is 91%. This means that the property is 9% under assessed. Hope this helps and best of luck.
Celia Szieber
Crossroads Realty-Executive Office
732.597.0060
0 votes Thank Flag Link Fri Oct 1, 2010
I find that buyers look at tax assessments and seller's purchase price in an effort to try to figure out a good offer amount. They want to be below the tax assessed figure because then they feel as though they are getting a bargain, and then control how much "profit" they will allow the seller to make (if any) by looking at the seller's purchase price. IMO these numbers provide information but the actual offer should be based on Comp Sales over the most recent 3-6 month period within a 1-3 mile radius.

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.
0 votes Thank Flag Link Mon May 24, 2010
This is a good nich in the world of real estate investing.
0 votes Thank Flag Link Sat May 22, 2010
Nosey - Picking up on what Nicholas said below, town assessments vary and are not always current, or even close to what market value may be. I will limit my comments to NJ, as it seems in other parts of the country, the sales price may affect the assessment moving forward - not so here.

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.

Best wishes...
Debbie Rose
Prudential NJ Properties
0 votes Thank Flag Link Sat May 22, 2010
Buyers are becoming more educated and are making an effort to understand how much taxes can effect their monthly nut.
Web Reference: http://www.sjrates.com
0 votes Thank Flag Link Sat May 22, 2010
Because Basking Ridge (Bernards Twp) reassesses every home every year, the assessments are generally a reasonable approximation of true market value (the price paid by a ready, willing and able buyer not forced to buy, to a ready, willing and able seller not forced to sell, in an arms length transaction, after sufficient exposure to the market.). Obviously this is not always the case as my colleague explains below however, the majority of homes in Basking Ridge sell within a few percentage points either side of assessed value. in these turbulent times many buyers fixate on the assessment with a view to paying less than the assessed value. This isn't a terrible starting point for a buyer in Basking Ridge but many other factors will come into play to ascertain the true market value - hence the value added by agent with local market expertize such as myself.
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.
0 votes Thank Flag Link Sat May 22, 2010
Valuing a property is an art, not a science. Buyers look to municipal assessments as one guide to a property's worth. This can be useful guidance, but you have to understand it's basis. For example, in Basking Ridge, we reassess every year. In theory, this keeps the assessmnets in line with 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.
0 votes Thank Flag Link Sat May 22, 2010
Prices were increasing 7 years ago, as Dan said. Now that home prices are more realistic, buyers might be evaluating the possibility of filing a tax appeal.

Laura Giannotta
Keller Williams Realty - Atlantic Shore
0 votes Thank Flag Link Sat May 22, 2010
It was, but you may not have been paying attention.
0 votes Thank Flag Link Fri May 21, 2010
Tax assessments are not the current market value of a property and should not be used as such. Current sales for the area that are similar in size, condition and location is what buyers should be more concerned with.
0 votes Thank Flag Link Fri May 21, 2010
I think the reason it might be a concern today is because 7 years ago many county tax records were not on the Internet. They are today - and this is just part of the infomation overload buyers want today.
0 votes Thank Flag Link Fri May 21, 2010
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