Good old Norfolk assessments in effect now are based on sales 12 to 24 months ago. Appraisals are based on a year or less. So they do not use the same comparables and at best they overlap by six months. That is why an assessment is all but meaningless. Three years ago when prices were going up 20 to 30% a year in your neighborhood sellers were laughing at the low assessments. Now they are closer to reality and in many cases over the selling price. In the 350,000-600.000 price range many areas of Norfolk had little to know sales, making appraisals a difficult job. In this respect a local agent who knows the price spread block by block can come up with what the home can appraise for on a given day and what it should sell for in a give amount of time. If is more art than science just like when we were listing homes with prices increasing. Most of the homes in Willoughby are still worth more than their assessments so I may be interested as a buyer as well as a listing agent.

Sat Jul 19 2008, 14:05

Bottom line : buyers determine your home's market price

We use CMAs to look at the homes under contract and the homes that have closed. I don't even focus on the ones currently listed. I focus on under contract homes, because they are the ones that have gotten offers. I get a good idea of what price point/sq footage/ bdrms/bths got an offer. I can also see market time. One thing I always look at in the MLS is property list price history. This tells the true story. I can see what price they started at and what final price got them an offer.

The sold properties tell me the same thing, but matter more because they have actually closed.

Appraisals are good if they are not for a refinance (they price it at what you need). I have never used an appraisal done for a refinance.
If my seller wants an appraisal, I order one from a reputable appraiser and make it clear we need a true market value. These are usually dead on right.

In any case...... not sure if you are listing your home or have already listed... but best of luck to you !


Angie Nishnick
Realtor, CSP
William E Wood & Associates
757-773-5456
angie@nishnickhomes.com

Wed May 28 2008, 20:37

Here's why.

Tax assessments are not necessarily current.
Typically - depending on where you live, property is assessed every 5-20 years (or in some cases not at all!). During the time between assessments - depending on where you live - a standard annual appreciation rate is applied to the previous assessment. THis is normally fairly low. Here in Douglas Co NV - it's 1.5% annually. This is low even by normal market standards - ridiculously low given the market we've been in for the last few years.

It gets even trickier depending on local regulations. Property assessments vary county by county. Again here in douglas co - i believe there is a regulation that says assessed values cannot exceed a threshold of 85% fair market value at the time of assessment. Go to another county - that might not be the case.
Property assessments are also 100% at the discretion of the county. My parents have a house in NJ for example that has not been reassessed since the house was built in the late 60s. Why? Property taxes are a hot-button political issue in NJ, and the politicians try not to rock the boat on that issue too much. Reassessment might mean owners end up paying even more in taxes then they do currently - so they just put it off indefinately.

Add all this up - and long story short is assessed values have absolutely no bearing whatsoever on fair market value of a property. It's not a guestimate, it's not nessicarily based on past selling activity - it's based purely on whatever the county decides it's based upon - which means it varies WIDELY. It's also not a fluid number - and does not adjust with market conditions - which makes it unreliable as a market indicator.

Wed May 21 2008, 15:13

As others have noted, city tax assessments aren't very accurate. What often happens is this: A property is sold. The tax assessment, which is supposed to be an accurate reflection of the value of a property, "resets" to the sales price. Now, as you note, the sales price may not always reflect the "true" value of a property. It can be higher or lower. But, for the moment, let's assume it is an accurate reflection of the property's value. The next year, houses in the area--often a fairly broad area--on average sell for 3% more than they did the previous year. Your assessment is likely to go up about 3%. It's a reasonable attempt to adjust your assessment.

However, that assessment increase may not take into account any improvements you've made to the property. It may not reflect the deteriorating streets or sidewalks in your neighborhood. It may not reflect a lot of things. So maybe the assessment is off by half a percent. Next year, there's another assessment. Same process is followed, and the assessment is pretty close, but again off by just a small fraction. And on and on. Those cumulative small fractions can add up, if there's a preponderance of them in one direction or another. And after 10 or 15 years, the assessment on that property may be substantially off.

Assessors also "play games." Here in Fairfax County, there was a big flap earlier this year about tax assessments. The overall assessment--property and land--generally remained flat. But the assessment "rejiggered" the relationship of property and land prices. On some properties, for example, the old assessment might have been $200,000 for improvements and $300,000 for land, for a total of $500,000. The new assessment was $75,000 for improvements and $425,000 for land. Again, a total of $500,000, but look at the underlying shifts.

The problem is that most of the appreciation occurs in the land. They're not making any more of that. Well, assume land values go up 3%. See how the assessments will change next year under the old formula and the new formula. They'll go up a lot more. So assessments are also subject to politics.

Those are just a few reasons why tax assessments aren't good to determine a listing price.

Regarding your question about a CMA factoring in sales due to tax and property assessment increases: Well, that does affect the values in the community. An appraiser (and even tax assessments) recognize distress or foreclosure sales. However, suppose you think the "real" value of your house is $500,000. But several of your neighbors have owned for decades; they're now retired, pinched by the tax increases, and decide they'd be perfectly happy selling for $425,000. Well, unfortunately for you, if there are 3 or 4 sales of properties comparable to yours at $425,000, that is what the comps will suggest. That's also what an appraiser will come back with.

Regarding your comment about variation among appraisals, there are a couple of reasons. First, as you imply, it's not a perfect science. Second, an appraiser looks at the most recent sales, rather than a long-term trend line. And--also very important--it depends on the reason for an appraisal. An appraisal for a refinance or a HELOC may come in very different than for an initial purchase. (Ever noticed that appraisals for an initial purchase often come in, to the penny, at what the contract price is? Coincidence? I think not.) I can't tell you the number of people I've spoken to who insist their home is worth $500,000 because that's what the appraisal was for their refinance. Their house was never worth $500,000--wasn't then, isn't now. But that was the figure that made the refinance work. Now, I'm not saying that appraisers are dishonest. But they don't operate in a vacuum, either.

As for the comment below suggesting that a real estate agent will give you an inflated price to get that 6%...some will. But first, understand that a CMA is not an appraisal. An appraisal is a lot more detailed (and should be more accurate) than a CMA. Second, an agent who provides an inflated suggested listing price is trying to get the listing. Of course. But the agent knows that if the house is overpriced, it won't sell. So, even if your house is just worth $450,000 and the agent says the comps are indicating $500,000, the agent is planning to come back to you in two weeks and suggest you cut your price. The agent doesn't expect the house to sell for that inflated price. Again, that doesn't happen a lot. But, yes, it does happen. What you can and should do is interview multiple agents, and get multiple CMAs. Then look at the so-called "comps." Are they really comparable? Are they geographically close by? Are they recent sales? Do some due dilligence.

Finally, take a look at houses currently for sale in your price range. How does your home compare to theirs? That's what buyers will be considering when they're making a purchase decision.

Hope that helps.

Wed May 21 2008, 15:08

Tax assessments aren't guesstimates, they are based on past selling activity. They aren't just made up out of thin air (state law says assessments have to be so close to actual price). But remember assessments are based on last year, not this year. I am a professional homebuyer in Hampton Roads, and my observations are that Norfolks' assessments are way the hell off. So in my opinion, either pay for an appraisal from a reputable company (you could always dispute it, they do show proof of where they came up with the values), do your own homework (I wouldn't suggest this, too cumbersome), have an agent do a CMA for you (they aren't perfect, maybe not as accurate as an appraisal, but sometimes right one). An Appraiser would only cost you a few hundred dollars, an agent might cost you 6% of your home price. I'd say go with an appraiser, after all, an agent may tend to price your home at a higher price, after all they do get 6% of that once it's sold. Appraisers have to financial interest in your property, agents are looking for a financial interest, who do you think will give you the more accurate number?

Wed May 21 2008, 14:39

Lll

Great question! The assessed value is for the benefit of the taxing authority, used to establish the budget for the City or Town where the property is located. The value, while based on prior like kind sales, is just an estimate of value. It does not need to be 100% accurate since it will be just one of the hundreds or, most likely thousands of properties valued. When demand is on the rise and prices are going up homes generally sell for higher than assessed values. Sellers who price in that economic environment at the assessed value will sell themselves short since the market value is higher. By the same token as prices fall, as they have been recently, many homes have an assessed value higher than the market value.
Call an established Realtor in your area, they know the market and what buyers today are willing and able to pay for a property. Ask for comparable sold properties and market data on the number of sales, average market time, and current market conditions. That will help establish a reasonable expectation for you.

Best of luck,

RMB

Wed Apr 30 2008, 07:22

It's best to get a Market Analysis from a good agent (or an appraisal) to determine the value. In the past the city assessment has been under the market value. Assessments usually don't take in to consideration the condition and upgrades of the house as much as a carefully prepared market analysis. That being said, I just got a new assessment on my Newport News home, and it is right within $5000 of market value.

Rosalind Boyle
Long and Foster

Wed Apr 30 2008, 06:16

If you sell your house at the assessed value, you could be short changing yourself by tens of thousands of dollars. With prices varying between $300,000 to over $800,000 in Willoughby Spit, it’s hard to precisely answer your question without knowing the location and value of your home.

Looking on the MLS, I see some older properties built in the 80’s selling for about $20,000 to $40,000 over assessed value, with only one recently selling at about assessed value. But I see others selling for $90,000 over assessed value too, so it really depends on your property, year built, location, etc.

A CMA however simply uses recently sold "comparable" properties, typically taken from the MLS. I've sometimes had to use comps from the tax records directly if properties were was sold by owner. But if I performed three CMA's for you over the past three years, my numbers would vary just as much as the certified appraisal. The market has been all over the map over the past three years, so that wouldn’t be a "roll of the dice," that’s the market over the past three years.

If you want to contact me, I would be more than happy to provide you with my "opinion of value" (aka: CMA) at no charge or pressure. It'll take me about 2-3 days for me to perform a ‘detailed” and “comprehensive” CMA for you, using both information from tax records and the MLS.

Hope to

Frank Biganski, Realtor ABR
(757) 303-0517
http://www.mrtownhome.net
http://www.chesapeakehousehunt.com

Wed Apr 30 2008, 02:28

Tax assessments are "guestimates" by the city and/or county where you live. They generally get more accurate as the number of sales increase, since they have more activity to base the numbers on. It's not a reliable number for a purchase price or offer, since there could have been $40,000 in improvements that didn't require a permit and those wouldn't be figure into the assessment.
As far as appraisals go, appraisers used to have more leeway in their numbers, especially when doing a refinance. Those days are gone for now. They are much stricter now in how they appraise and lenders won't even lend above 80% loan to value in many areas without the buyer or owner having a 700+ FICO or getting mortgage insurance.

Tue Apr 29 2008, 22:49