News and Events

By Kevin Huerkamp

 I always thought homes sold for more than their assessed value, but I have noticed that homes in my area are selling for less. How can that be?

There’s a common misperception in the marketplace that homes should sell for at least their assessed value, if not more, but that’s a myth that’s based on a lot of assumptions. First, it also assumes that the county and municipality are completely up to speed on a property’s condition, improvements and other variables that quantify its value compared to other homes in its area, which is impossible. Some people take extraordinary care of their homes, while others do not; it’s impossible for the county and local municipalities to stay on top of tens of thousands of properties. It also assumes that properties are appreciating at a greater rate across the board than their assessed values are increasing and, as we’ve been in a down market and experiencing declining property values over the past few years, it’s unreasonable to assume that homes are now worth more on the retail market than they are on the tax roll.

By no means is a property’s assessed value intended to be a fair-market determination of its retail value. Buyers make the mistake of believing a great home that’s under-assessed is worth it’s assessed value, when in fact, they should acknowledge that it is worth more because it has so much more going for it, including lower taxes. Sellers make the mistake of thinking their home is worth more than its assessed value when it could be over-assessed. And rather than protest an assessed value they know is too high, they’ll leave it alone because they expect it to sell for at least that much. If it was true that our homes’ assessed values were an accurate reflection of their market values, wouldn’t we all want our homes to be over-assessed?

We all expect our taxes to go up due to inflation, bigger tax-supported budgets, and other factors. The assessed value is calculated to determine a property’s worth so that its owner can pay its fair share of taxes. It’s not calculated in a vacuum, one house at a time, but rather, with all homes pitching in together. Therefore, you cannot analyze one property’s assessed value in a vacuum. How are other homes comparable to it and near to it selling relative to their assessed values? A property’s assessed value is just one metric I will look at within the larger context of determining its retail or market value. If the homes around it are selling for more than their assessed values, that gives me something to think about when I value that home; same thing if it the pattern goes the other way and they are selling for less. If there’s tangible evidence – recent sales of comparable homes in its area -- to suggest it could sell for more than its assessed value, that’s a confidence I want to have when I put it on the market at a certain price; if there isn’t, that’s something the seller needs to understand.

At Next Generation Realty, our goal – just as it is our clients’ goal – is to sell the property for its best and highest price. That starts with getting the property priced to sell relative to its condition and its competition. One of our company’s standards is we will always do a Comparative Market Analysis to determine its fair market value. There is no cost to for us to do a market analysis.