how much the assesment for tax purpose related to the current value of a property?

Asked by Leong, Framingham, MA Sun Nov 25, 2007

if a condo has estimated value 30k below the listing price and the condo fee is relatively lower than surrounding units, shall i conclude it is valuated too much by the seller?

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Bart Foster, Agent, Boston, MA
Sun Feb 17, 2008
Pricing is as Much Art as Science.... do you care to dream.

With resale the battle to sell the home is to price it correctly. The challenge: Sellers want as much as the last sale. But in today's market that's not as guaranteed as it was when buyers were making offers at the drop of a hat and sellers were more than eager run with the cash to the bank or often to their next home.

Thus, pricing is the key. There are only a few ways to price property for sale and sellers who don't want to wait around on the sale of their home need to adapt to the accepted modes of pricing and get over the fact that the VALUE of their house may not be worth as much as it was 12~24 months ago.

Pricing a home:

1) The first and for the most part most popular -- the comparable method. By pulling up only the sales of your particular model, the Realtor can determine a trend price for your home. The challenge in a slowing market is that your particular model may only have three sales in the last year. Such a low number of houses selling does not really create a trend line, especially if the last sale was 6 months previous. Thus, you turn to the second pricing model.

2) Dissected your property into several aspects such as style of home (split level, colonial, etc.); number of levels; number of bedrooms and baths; extra rooms; year built; square footage; parking; lot size; level of renovation and more. Appraisers might use terns such as “Superior” or “Inferior” and assign a value. Then the averages on these parameters are tabulated and you'll have a target price. Keep in mind to remove the highs and lows.

3) Finally, another way to price your home is to come up with model based on the “Tax Assessments”. Here is where science meets reality. Note, Seller’s who are engineers or analytical in nature will dig this. Unfortunately, as this one takes a little bit more homework and data mining, and is downright tedious, it can present one of the most accurate pictures of home values in your community. First pull up all the sales in the community in the last 3-6 months, the more the better. Tabulate the sales price total (let's say it comes up to $9 million) and then tabulate the tax assessment total (our model will use $10 million). Note: use assessments for the same year. Divide the tax assessment into the sales price and you come up with a tax assessment-sales price ratio. In this case, the community ratio is 0.9. Multiply your tax assessment by the ratio figure and it will determine your target asking price. For example, if your tax assessment is $400,000, multiply it by 0.9, you'll arrive at $360,000 as a target asking price. Again, be careful to pull out the anomalies that represent overbuilt properties. The largest, biggest house in the community could affect your price, as well as the pre-foreclosure sale. The beauty behind this method is that assessments are always being revised to follow the market. If you feel that you are neither being under nor over assessed as compared to your neighbors home, then embrace this method.

If you really want to try something for fun, ask your Realtor to create a scatter plot of Sales and Assessed values over the past 5 years. The result will be a visual representation of the relationship over time between the two. In almost every market, state, city and area, the averages converged and is now upside down…. Assessments exceeding sales prices. This is normal. Just understand the relationship and you will be that much closer to selling your property than your competition.

FYI, Codo fees have nothing do do with value. They represent a % of the common area expenses for the project. For example, if the unit has a 3.5% common interest and the expenses are $100K (common heat, water, sewer, maint. etc) then the yearly fee is $3,500.

Hope this helps.

1 vote
Jeanne & Jul…, Agent, Hyannis, MA
Thu Nov 29, 2007
YES! especially in today's market. Prices can be had for way below assessment. CHeck out my website: to see all listings with addresses for FREE.
1 vote
Bart Foster, Agent, Boston, MA
Mon Nov 26, 2007
Most Real Estate agents over generalize with comments such as none. But I disagree. In very general terms, assessed values have no relation. But read that again… the key here is In Very General Terms. In fact they do and can offer perhaps the most accurate picture of a properties value when a greater picture is taken. The concept here is known as The Assessment Model to calculating home values. . . It goes a little like this. In any market there will be a ratio of assessed values vs. actual sales values. To calculate this, gather 50 to 100 of the most recent sales for property similar to the subject. Total up the Assessments and Solds and divide the Sold by Assessment. This will give you a simple ratio. Now take the assessed value of the property in question and multiply it by this ratio and you come up with a number. It is really that simple. The most difficult part is gathering the data.

Please keep in mind that all of the assessments must be for the same year. So if taking date from the MLS, be certain to update any prior years numbers with current for when the properties sold. This method assumes you buy into one concept: that all property are being fairly assessed including the subject. Some will sell for more than assessed while others less than. This is ok as the law of Averaging is working here. The more data you gather, the better. Do not try to play with the data though.

Here are a few things to look for. If say the ratio is say less than 1, property are selling for less than assessed (on average) or if greater than 1, properties are selling for more than assessed (on average). The later was the situation for well over the past 15 years. But in more markets than not, be it Boston or Framingham, the situation just flipped I use this as tool to assist with determining how well a property is priced. If the ratio against the subject is say more than 15% above what it should be, it is a good indication for an unsold home. Do not believe me, take a look at all those homes that failed to sell paying special attention to their original list price vs. assessed value.

Hope this helps.
1 vote
David Botelho, , Naples, FL
Mon Feb 18, 2008
It depends on the area you live. Ask a local realtor to give you a list of recents SOLDS in the area, they mean much more then assessments.
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0 votes
Real Estate, , Charlotte, NC
Sun Feb 17, 2008
February 2008

Unfortunately, because of the horrid turn in the housing market across the country, many buyers are being forced to sell their homes for much less than tax value. Sellers (and Realtors) must realize that there is an oversupply of homes on the market at this time, and the Buyers are in charge if they can obtain the money and/or financing.

At this time, a home may realistically sell for much less than tax value and/or for much less than mortgage value.

Smart buyers are relying more heavily upon the tax value as a baseline bargaining tool, and rightfully so in this market. Additionally, relocation companies (companies hired by corporations to offer home buy-out plans to relocated employees) are now referencing tax value when obtaining appraisals for buy-out price purposes. So buy smart so you can sell smart. Reference those tax values and take caution when purchasing a property above that value in this market.
0 votes
Gerry Bourge…, Agent, Leominster, MA
Sun Jan 13, 2008
The 'Assessment' is purely what the Town/City has the property valued at for 'tax purposes' and that is it. They do need to certify the values with the state (in MA at least), and they need to substantiate the values as well. That is why they do an appraisal on a representative sample of properties in the town/city then use that to develop a "formula" to determine the assessments. Given the way the fiscal year works in many towns/cities, the values are about 1.5 to 2 years 'behind the market'.

Once they have the assessed value of the entire town, they then divide it into the town/city annual budget and thus comes the tax rate. You cannot run a town/city at a deficit in MA. Therefore, if values (read: assessed values) go up and the budget stays the same, the tax rate will go down by the same percentage as the increase in assessment. If 'values' go the other way, then the opposite would hold true.

Given how the system works, it is important to note that all of the proparty data on the "Assessors Field Card" gets plugged into the same formula. Therefore, two identical units should have basically the same (or very similar) assessed value.

It is a good idea to pull (get a copy of) the assessors field card for the property that you are looking at to see if the data is in fact accurate (in some cases it is not).

Also, given that each town has their own formula for determining assessments, it is VERY important to NOT compare assessments to a property from different a town/city as it is an 'apples to oranges' comparison.

So back to your question, if you can compare the assessed value for similar SOLD units in the same complex the answer should come clear to you.
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0 votes
Trina Macchi, Agent, Hopkinton, MA
Sun Jan 13, 2008
Assesment is not a good way to value a property. Fair market value and assesments are completely different. A good real estate agent will value a property based on recently solds, within 3 months. If a home is assessed low, then don't sweat it, your taxes will also be low and this is a good thing!
0 votes
Peggy Gabour, Agent, Brewster, MA
Thu Nov 29, 2007
Terrific Answer, Bart, I agree with you.

Peggy Gabour
0 votes
John Savigna…, Agent, Hopkinton, MA
Sun Nov 25, 2007
tax assessment value has no relevance to market value other than in general terms you may be able to see a pattern. like, all the homes or condos in a given n.hood are selling for $30000 above assessment or $15000 below assessment, etc. As far as condo's the condo fee is divided equally amongst all the units based on a percentage of the total in other words if you have 10 units that are 1,000 sq ft each the condo fees would be the same. If one unit is 650 sqft. it would be proportionately less. You may want to ask a realtor to help you with some historical data for units in the complex. I would be happy to help.
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