What's the Difference?

Your home is often your greatest asset. If not the greatest, certainly the most expensive. It is usually the focal point of your financial picture. One thing that it certainly is, the determinant of how your annual property taxes are calculated. Yet, when you go to look up your homes value, you find several different numbers which can often lead you to questioning. What is my ho

me really worth?

The real answer to that is your home is valued in different ways for different reasons. There is the assessed value and there is the market value. Let me preface the rest of this article with sharing that the assessed value is often lower than the market value...and that is usually a good thing. Let me explain.

The assessed value of a home is generally used for tax purposes. Though homeowners usually want their property values to grow over time, in this case, it’s better when the home’s value is lower.

That’s because the higher the assessed value, the higher the property taxes. Depending on location (ie. city, state, municipal area) the tax assessor evaluate several factors, including any improvements you have made, whether you make any income from the property (from renting out a room, for example), the replacement cost of the home if it were destroyed and how much similar homes in the area are selling for.

Market value is used by lenders, buyers and sellers to estimate the appropriate selling price given current market conditions. It’s essentially the value that assessors attempt to come up with before applying the assessment rate. Its what a prospective buyer would be willing to spend on your home and what you would be willing to sell it for.

Market value is determined by evaluating a number of factors, including:

• Overall condition. The appraiser will examine the interior and exterior of the home an

d look for any damage.

• Curb appeal. This refers to the general attractiveness of the property and its surroundings, including painting, landscaping and other aesthetics.

• Size. Factors such as square footage, number of bedrooms and lot size also are considered.

• Amenities. If your property features certain extras such as a pool, includes major appliances or is retrofitted with certain energy saving features, these could factor into the overall value.

• Comparable properties. The appraiser wil

l look at how much properties in the area with similar features sold for recently. The appraisal should fall into the same ballpark.

• Buyer’s or seller’s market. The overall state of supply and demand in the market will also play a role in your home’s value. If there is a glut of homes on the market, values will decrease. On the other hand, if demand is high, values can be inflated.

As a homeowner, there are many reasons to know your market value. For example, if you bought a home several years ago and the value increased, you have more home equity. You can leverage this to qualify for refinancing or secure a home equity loan.

If you’re looking to sell your property, it’s important to list it for a price that’s attractive to buyers but will also get you the best deal possible. Plus, lenders won’t approve mortgages for homes that are overvalued, making it tough to se

ll a home that’s priced too high.

And if you’re interested in buying a home, you want

to know that the listed price is fair for the market. For instance, if a property’s assessed value is $150,000 but the seller has it listed for $300,000, you can use this information to find out why there’s such a discrepancy and potentially negotiate a lower price.

When it comes to assessed value, you might wonder what happens if you live in an area where the housing market is hot and homes are selling for far more than they’re worth. After all, that’s not exactly fair to homeowners who don’t want to sell and are stuck with the rising tax bill. An appraiser will asses the market value of your home, while the tax assessor will provide the assessed value of your home.