The value of a home is an essential factor for homeowners, buyers, and sellers alike. But how exactly is the value of a home determined? There are several factors that come into play when determining the value of a home. These include the location, size, condition, age, and property features.
One will come across assessed and market values. Understanding the difference between these two values can help you make more informed decisions regarding real estate. In this article, we’ll explain how a home’s value is calculated and dive into the importance of knowing the difference between market value and assessed value. So, let’s get started and demystify the world of real estate property values!
The assessed value of a property is the value assigned to it by a government entity for taxation purposes. This value is determined by local assessors, who are responsible for assessing the value of properties within a specific geographic area. The assessed value is typically a percentage of the market value of the property.
Factors that affect the assessed value
Several factors can impact the assessed value of a property, including:
- Location: Properties located in desirable areas with high demand may have a higher assessed value.
- Size and features: The size of the property, the number of bedrooms and bathrooms, and other features such as a pool or garage can all impact the assessed value.
- Age and condition: Older properties may have a lower assessed value than newer ones, and the property’s condition can also impact the assessed value.
- Local tax rates: The assessed value is used to calculate property taxes, so the local tax rates can also impact the assessed value.
Market value is the estimated price a property would sell for on the open market, assuming both the buyer and seller are knowledgeable and willing and that there is no undue pressure on either party. Market value is determined by the forces of supply and demand and various economic, social, and political factors that affect the real estate market. Unlike assessed value, market value is not a fixed number but a constantly changing and fluctuating estimate.
Factors that affect the market value
There are a number of factors that can affect the market value of a property, including:
- Location: The neighbourhood, school district, and proximity to amenities such as parks, shopping centres, and public transportation can all affect a property’s market value.
- Condition: The physical condition of the property, including its age, maintenance, and renovations, can all impact its market value.
- Size and features: The size of the property, as well as its features such as the number of bedrooms, bathrooms, and special amenities like a swimming pool or fireplace, can all affect market value.
- Recent sales: The sale price of similar properties in the area, known as comparables, can also impact a property’s market value.
How Assessed Value and Market Value Affect You
Here are some key points to understand how the assessed value and market value of your home can affect you:
- Market value is the price at which a property can be sold in the current market, while assessed value is the value assigned to a property by the government for tax purposes.
- The market value is influenced by location, property condition, and market trends, while the assessed value is typically based on property size and recent sales data.
- Understanding these values can help you make informed decisions about your property, whether selling, refinancing, or purchasing a property.
- If you plan to sell your property, pricing it competitively can attract buyers and help you maximise profits. Similarly, knowing the market value can help you avoid listing your property for an unrealistic price.
- The assessed value is used to calculate property taxes, and it’s important to know how it’s calculated to ensure you’re not overpaying in taxes.
- Property improvements and local tax rates can affect the assessed value, and it’s essential to understand how to find this information to avoid any discrepancies in your tax bill.
- Some areas may experience rapidly increasing property values, leading to higher tax bills for homeowners. However, many states and municipalities have laws to prevent tax increases from jumping along with inflated property values.
It’s essential for homeowners, buyers, and sellers to understand the difference between assessed value and market value. Knowing the market value can help you make informed decisions about your property and avoid overpricing or overpaying. Similarly, understanding the assessed value can help you avoid any discrepancies in your tax bill.
If you’re unsure about the value of your property, it’s best to seek help from a reliable valuation firm. At RNC, we provide accurate information to help you make the best decisions for your real estate property. So don’t hesitate to reach out to us to get the professional guidance you need.