One of the biggest myths in Real Estate is a homes assessed value having a correlation to it’s present market value.
Unfortunately it is easy to see why the general public is often times confused about this because a number of Real Estate agents fail to educate their clients that there is a big difference. Trust me looking at assessed values is no better than using Zillow.com to figure out what a home is worth!
When the assessed value from the town is higher than what a property is on the market for you will often see Agents writing advertising that says something like the following “Come see this bargain home that is priced $75,000 less than the assessed value”. What this immediately tells me is the Agent either does not know anything about property valuation or they think there will be someone foolish enough to believe the home really is a steal. Someone that knows better is going to be thinking the property has been over assessed by the town and the seller has been paying too much taxes!
Of course on the other side of the coin you will see home buyers who see a home listed higher than the assessed value and if they have not been educated properly by their buyers agent, will improperly use this as part of their negotiations when making an offer. If more people were better informed they would know that assessed values are a worthless piece of information when evaluating what a property is worth.
Most people realize that market values of homes in many parts of the Seattle area have dropped quite a bit over the last five years. As values were dropping there were many that believed their taxes would also be coming down too. When people misconstrue that assessed values and fair market values are the same they will automatically come to this conclusion.
In theory this should be the case but assessed values are nothing more than a yard stick for a municipality to collect an appropriate amount of taxes to sufficiently cover the state and local appropriations chargeable to the city or town.
The assessed value of a property often lags the market because the valuations are not re-calculated until the beginning of the next calender year. So if the market values of homes are dropping it is not unusual to see the assessed value being higher. Likewise if values are going up it could be just the opposite.
Over the years I have seen some of the strangest things when it comes to assessed home values. Believe it or not I have seen some homes that are as much as a couple hundred thousand over or under assessed in comparison to their sales price.
I have seen two homes built by the same builder side by side where home “A” was larger and had a bigger lot than home “B” yet home “B” was charged more in taxes due to a higher assessed value. Kind of mind boggling don’t you think?
What I have also observed is that a home that has re-sold more recently will usually have a more accurate correlation of its market value compared to its assessed value than a home that has not sold in a long time. For example, a home that sold three years ago more times than not would seem to have a more accurate correlation than a home that has not sold in ten years.
Yet another example is the home owner who feels they are being over assessed by the town and decides to challenge and wins an abatement. Their assessed value is now reset to the lower value. Does every other home owner who has a similar property get a notice in the mail saying their homes assessed value will also be coming down courtesy of the research done by Mr. Jones next door. Fat chance amigos!! This is the case of the squeaky wheel getting the grease.
So what are you supposed do if you think your assessed value is out of line with other like homes in your neighborhood or town?
You should head to your local Assessor’s office and file for a tax abatement! All the information necessary regarding the application process and the deadlines for filing should be made available to you.
Applications for abatement’s are due on or before the due date for payment of the first actual bill. The town’s assessor typically has up to three months in to act upon an abatement request.
If you are denied your abatement request and do not feel that the assessor made the proper ruling you have the right to appeal to the State Appellate Tax Board.
In summary an assessed value is the valuation placed on a property by a public tax assessor for purposes of taxation. Fair Market Value on the other hand is the agreed upon price between a willing and informed buyer and seller under usual and ordinary circumstances. It is the highest price which the property will bring when exposed for sale on the open market to a buyer who is purchasing with full knowledge of the properties highest and best use.
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