My neighbor has his house listed $200K below the current market. How will that affect an adjacent home sale pricing when the other houses are taxed?

Asked by Ednabarber777, Washington, DC Tue Jun 21, 2011

appraised at $900K?

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Benjamin Ste…, Agent, Washington, DC
Tue Jun 21, 2011
If or when your neighbor's home (selling for less than the market) actually settles, it will be reported to DC gov. It will become one (1) statistic used to determine the tax assessment of homes in your neighbor. You might be able to use that home's statistics in future year's re-evaluations of your property assessment but you will need to take actions to challenge the city's assessment. There are many aspects of this process you will need to learn about but you can always challenge the city's proposed tax assessment. And people who challenge often receive some positive results, like a postponement of the new increase or some adjustment. Good Luck!
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Erich Cabe, Agent, Washington, DC
Tue Jun 21, 2011
That's a great question, and the answer is, it doesn't affect the value of your home at all.
What matters is what the house sells for. If the home is truly listed for 200K less than it is worth, it should sell at the market value regardless of list price. Once it sells, the final sales price becomes a comparable sale in your neighborhood.
I hope that helps.

Erich Cabe
Prudential Carruthers Realtors
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1 vote
Faraji Whalen, Agent, Washington, DC
Tue Jun 21, 2011
The short answer is negatively. The long answer really is a factor of the market itself. If the market is really 200k above what he's asking, there will likely be a bidding war for the house which will end up with him accepting a contract close to or at "market." However, if he ends up settling at his current pricing, and assuming the house is in similar condition to others listed, then what he settles for will affect future buyers' willingness to bid significantly over that. I'm assuming when you say taxed, you mean the municipality's property tax assessment. This may have some affect on what banks are willing to lend on a similar property but is less deleterious than a low recorded purchase price to surrounding home values. Hope that answered your question.

Faraji Whalen
Domus Property Management
1 vote
Akil Walker, Agent, Upper Marlboro, MD
Tue Jun 21, 2011

It appears your neighbor is motivated to sell. Of course if an adjacent home is listed, then the home that is 200K below market is now their competition. and this leads to the begging the question as to why one home is listed at one price and the other 200k more? There could be many reasons as to why i.e. upgrades, more living space, etc.

In terms of taxes the short term should have no effect on the property taxes given the climate of varying priced homes for sale.

Hope this helps
1 vote
George Ross, Agent, Baltimore, MD
Wed Jun 22, 2011
Hi Edna,

It would be helpful for us to answer your question more specifically if we knew the basis from which you are coming from. Because as many other professionals have stated, the list price of a home does not dictate the final sales price and final sales price does not necessarily impact the tax assessment of a neighboring home. My answer is based on the assumption that you are hoping your taxes go down if the property is sold for $200K less.

There are many factors that affect the assessment value of a home I will provide you with a link so you can look up some of them which have already been stated, like square footage, # of bedrooms, etc, etc please see here for additional information…

If you were to look at tax bills now, you will see they vary somewhat in your neighborhood already, given the fact that Chevy Chase itself is a community in DC where homes have many unique characteristics and without an interior inspection one will never know. Tax values are generally based on the historical reported information (i.e. permits, etc) and the exterior of the home and not on any improvements that can be quickly observed from the outside (like a finished basement).

Additionally, DC has many Tax Relief programs and Tax credits like the Homestead Exemptions, Historic Tax credits, Senior and Disabled, as you can see, a little homework can go a long way in maximizing all the credits you can take advantage of in the District and the other option you have is an assessment appeal.

Also, please note that it depends on when your home was purchased as to how it affects your tax bill because there is an annual cap on taxes regardless of what the values of the current sales prices are in the community.

I hope this helps and is what you were looking for in terms of an answer and pointing you in the right direction of understanding a little bit about tax assessments!
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Melissa Bark…, Agent, Washington, DC
Tue Jun 21, 2011
Hi Edna

As the others have answered, tax assessment is not the same thing as market value. Have you been inside the house? It might not be updated, it could have fewer bedrooms, is the lot smaller? The owners may need to sell quickly or by listing it at a lower price they might trying to get multiple offers that will drive up the sales price. There are many unknown factors to be able to draw any real conclusions from. It will be interesting to see what the house really sells for, closer to the list price or over it.

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Kelly Putz, Agent, Fairfax, VA
Tue Jun 21, 2011
Hi Edna,

I think we may be talking apples and oranges here. Tax assessment and sale price are not really related to each other. The tax assessment is based on whatever formula the gov't happens to be using at the time to decide what your property is valued at. The sale price of any home is based on what the current market will bear, which is why you can see some very wide variances between tax value and market value.

So, your neighbor listed his home at $200K below current market - well, what market is that? Does it have a fewer number of bedrooms and bathrooms as the rest of the houses around it? Does it have less land? Has it been updated in the last 10 years? Also, there may be a possibility that they need to sell quickly and their savvy Realtor® has priced it below market to get a lot of attention and get several contracts competing against each other, which would in-turn bring the price up to market value.

It would be interesting to see what this house actually sells for, finally.

Kelly Putz
Buyer's and Seller's REALTOR®
Keller Williams McLean
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David Burnham, , Washington, DC
Tue Jun 21, 2011
I agree with Erich, It really matters what it sells for. A lot of neighborhoods in DC are pretty hot and pricing a home below market value in this market will tend to draw multiple offers and push the sales price above the listing price. Keep in mind though that just because the home is assessed at $900k, does not mean it is valued at $900k. It could have a market value much less.

If the home sells for below market value, it could bring prices down in the immediate area, however a good listing agent will try to let an appraiser know that the home was not sold under normal conditions. If the buyer seller had to sell quickly and priced the home low to accomplish this, then that fact should be accounted for in its appraised value.
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Gerard Carney, Agent, Spring Hill, FL
Tue Jun 21, 2011
It wont if it is the odd sale, though it will hurt any homes in the area for next few months when appraisers use this one in their equations
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Lanre Folayan, Agent, Washington, DC
Tue Jun 21, 2011
I like the answers given by the three real estate pros.
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