How assessments compare to sale prices
Posted on Sunday, December 16th, 2007 at 10:16 pm.A client asked us:
One thing I noticed is that the 2007 assessment for ØØØØØØØ was $600k and ØØØØØØØØ was $500k. How should we take assessments into consideration when placing a bid?
Our response:
To answer this question, we first must explain how home assessments work. The job of the county assessor is to try and estimate the value of a property so the county can then assess property taxes on that property.
The assessor does this mostly by taking the price of the homes that have sold near the subject property and adjusting them up or down based on how it compares to the comprables.
There are two problems with this approach:
- Counties have thousands of properties they have to track, and only a limited staff to do it
- By following historical property sales, the assessments will always trail the trends in property values, meaning when prices are rising, the assessed values may be lower than current market values, and when prices are falling, the assessed values may be higher than market values
Point #2 can often be overruled by point #1. The county has such a limited staff to handle thousands of transactions that they can't pay very close attention to any single transaction, so you should never take the assessed value to mean anything more than 'that's the value the county is basing the taxes on.'
So, to answer the client's question, we can safely say that the $100k difference in assessed value means that the county believes property A is worth more than property B. But does that mean the market believes that to be true? Possibly. But it could also just mean that an assessor paid closer attention to property A than property B when determining its value, or that property A has more expensive neighbors. In fact, there can be so many reasons for the discrepancy that we don't suggest putting too much stock into it, except to note the difference and consider it as one of many factors when deciding how much to offer.
A much more important consideration are the comps of other homes that have recently sold in the neighborhood, because those truly do determine the value of your home.
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