At times you can have sellers justify a higher sales price by correlating it to their assessment, but even this case is the exception and not the rule. As others have posted, the only way to arrive at a good estimate for a home's value is to compare it to similar homes that have recently sold. Neither agents or appraisals even look at a home's tax value when arriving at a value. It's simply not a factor.
Especially in more expensive areas of Potomac, I often see a huge gap in the real vs. tax value. Given the continued downward pricing pressure in parts of Potomac, a buyer is well-served by buying under today's fair market value to protect your equity in the short-term.
I have a couple articles describing the Potomac real estate market at http://mocorealestate.com/areas/potomac/
Also, the Potomac market is holding up better than many others in Montgomery County. See how it compares at http://mocorealestate.com/2009/02/08/montgomery-county-homeb
Hope that helps. Let me know if you would like additional information that suits your specific needs.
I did a correlation analysis between list price and tax assessment for 108 properties that are currently on the market or were recently sold in 20854 that are in the price range of 600K - 1M. 8 properties did not report a tax assessment on their record so I excluded them.
Some findings for the 100 properties:
- The correlation between list price and tax assessment was 72%.
- 57 had a list price that was below tax assessment, 40 were above tax assessment, 3 were offered at tax assessment.
- 77 properties were listed between 85% and 115% of tax assessment.
In sum, I would say that, in this environment, agents who do not look at tax assessments at all could make their lives a little easier if they would. ;) Tax assessment does seem to be a good first approximation for the listing price. Given that this is a buyer's market, the final price is typically lower than the listing price so this would suggest that tax assessment may be a benchmark for an offer. This is not a universal law. A few years back a buyer would have to pay significantly above tax assessment to be successful.
That said, as was pointed out before, a value analysis is certainly also helpful to estimate the market value of a house.
Tiny's data show that almost 68% of the homes (93 out of 137) sold for lower than their tax assessed values. You can draw your own conclusion, but surely the conclusion drawn by Tiny is not supported by her own data ("So, no, the tax assessment really has nothing to do with determining the market value of a home.").
As an agent, my job is to advise my seller clients to price the home appropriately. The way to determine the most appropriate price is to look at the market value which is what comparable homes have sold for recently. Agents do not even pay attention to the tax assessment because it is irrelevant.
Many thanks for your feedback. I would like to follow-up with an additional question to benefit from your experience having represented sellers.
Given the current market conditions (which in general have become more favorable for buyers), are the expectations of sellers related to the tax assessment? In other words, everything else being equal, do sellers with a list price that significantly exceed the tax assessment a higher willingness to negotiate on price than sellers with a list price that is close to or below the tax assessment?
There were 137 homes (condo, townhouse, and single-family) that sold in Potomac in the last six months. Forty-four of those homes sold for at or above the most recent tax-assessed value, which is almost a third. So, no, the tax assessment really has nothing to do with determining the market value of a home. What matters most is location, condition, and list price.
The answer is 'no'. I often see a tax value that's way off from the current value.