Right before you decide to sell you’ll have a thought: What is my home worth? Then, you’ll either run from or embrace the answer depending how close the number comes to your expectations.
Even if you come to grips with the current value of your home, you’ll want to know what factors contributed to that number. The value of your home is determined in two different ways, assessed value and market value; each has its own application.
Which value is considered by a Real Estate Agent when pricing your home? Which value is considered by your local government when deciding your property taxes? Let’s find out:
What is market value?
Market value is best described as the amount of money a buyer is willing to pay for your home in an open market transaction. In other words, the amount of money your property is currently demanding.
The market value of a home is usually calculated by the Real Estate Agent hired to handle the sale of the property. A real estate agent will consider the following when deciding the fair market value of your home:
Comparable's = the recently closed sales (within 6 months) for similar homes within a mile of yours.
Internal and External Condition = the current physical state of your property (i.e. roof health, lot features, internal home features, etc.)
Location = the health and desirability of your neighborhood (accessibility, school ratings, occurrence of crime, etc.)
Supply and Demand = the inventory currently available in your area. Are you in a sellers or buyers market?
What is market value used for?
List Price when Selling
An accumulation of this information informs a Realtors suggested list price. Homeowners will frequently reject an agents opinion of fair market value because it doesn’t match the number they had in their own mind. You may have envisioned getting top dollar for your property but the market may not currently support it. Be aware that a responsible buyers agent will also run their own comparable analysis to inform the offer their client makes.
Rest assured that an inflated opinion of your homes value will cause it to sell at a much slower pace.
Determining property taxes
Fair market value is also used as part of the formula when calculating assessed value. In Florida, your homes taxable value is a combination of: ‘market value minus the homestead cap, non-homestead cap, portability and any exemptions’.
What is assessed value?
Assessed value is the dollar amount assigned to a house that determines its property tax. It takes into account:
Replacement cost of the property
Characteristics of the property (sq. footage, home features, etc.)
Income generated through the property
How is assessed value used?
An assessor will collect the relevant property information and combine it with current market value, and exemptions to come up with the assessed value. This value will determine the amount of property taxes you pay each year. If a homeowner feels the assessed value of their property was not fairly considered, they may file a ‘reassessment’.
The reassessment allows for a second evaluation of the property.
Property taxes are often times the biggest form of revenue for local governments. To ensure the assessed value of a home is both accurate and representative of the current market, your local government will reassess your home annually.
Valuing your home goes beyond one persons interpretation. It’s a combination of the current market and the overall value your property offers. Each type of valuation informs the other so it’s wrong to assume they’re mutually exclusive. One better informs the sale of your home and another the tax value. Realizing your homes true value is a combination of both.