If you’re planning to sell your home some time soon, knowing its current market value is extremely important in order to price your home right. Of course, many sellers tend to believe that their homes are worth a lot more than what they really are. But it’s not wise to establish a listing price based solely on what you might think your property is worth.
Sound research and due diligence are required to come up with a price that accurately reflects the current market and what buyers would be open to spending for a property.
But while market value is certainly a critical component to consider, there’s also a thing called “assessed value,” which is not necessarily the same thing.
So, what’s the difference between ‘market value’ and ‘assessed value’?
Essentially, market value is the price that a certain property would most likely be able to command in a specific market at any given time. It’s basically the price that a property would be able to sell for within a reasonable period of time, and one that a qualified buyer in the area would be willing to pay for a home.
In order to figure out exactly what a home’s market value is, several factors need to be considered, including its location, exterior and interior condition, lot size, house size, number and size of rooms, age of major systems and appliances, and so forth. Usually, these traits are compared to that of similar homes in the area that have recently sold, which are referred to as “comparables.” Real estate professionals use the market value of a home to determine a fair asking price.
The assessed value of a property is based on a percentage of its appraised value, and is used to establish how much will be owed to the local government in property taxes. The local assessment office sends out assessors to determine the value of properties within a specific area.
More often than not, the assessed value of a property is lower than its market value. In fact, about 60% of properties across the U.S. are assessed at a higher value than their current market value, according to the National Tax Payers Union.
The assessed value of a property is not necessarily what a home will sell for; instead, the market value of a home is what will usually determine its listing price and roughly what it will sell for.
Tax assessors aren’t required to match the actual market value by adjusting property assessments every year. For this reason, there’s usually a big gap between what a home can realistically sell for and what it’s worth according to the municipal tax office.
An actual appraisal conducted by a professional home appraiser will give you a much better indication of what your home is worth according to current market conditions compared to what’s on paper as per your annual tax assessment. Recent comparable sales of similar homes in your neighborhood that appraisers – as well as real estate agents – use as part of their appraisal will give you a much clearer indication of what you can realistically list your home for.
The Bottom Line
When it comes to selling your home, you’ll really want to know what its market value is as opposed to its assessed value. While the assessed value is important as it pertains to how much you pay in property taxes every year, the market value will tell you what you should list your home for in order to increase the odds of a successful transaction.
It’s the market value that will guide you to selecting the right price that will attract qualified buyers looking in your area. Before you list your home, get some advice from your real estate agent who will do the research necessary to provide you with an accurate and objective assessment of the value of your home based on its traits as well as recent sales in the surrounding neighborhood.