General Question

DarlingRhadamanthus's avatar

What is the difference between a property assessment value and selling price?

Asked by DarlingRhadamanthus (11213 points ) August 20th, 2010

I saw a property that was assessed for taxes this year (2010) at 140k and yet, the selling price was 300k. I have never seen this huge a difference in the two values.

Am I missing something? I thought that the assessed value of a property and its current selling price would be close to the same price especially if it was a current year assessed value. When there is such a huge gap and the property is vacant, is there some leeway in negotiating a lower price?

Hope someone can shed light on this.

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6 Answers

perspicacious's avatar

Some jurisdictions use a percentage of presumed market value for the assessed value, while others base tax on the full market price.

WestRiverrat's avatar

Some jurisdictions also use a discounted assessment if the owners are senior citizens.

JLeslie's avatar

Depends where you live. In some states they only assess every 3 or 4 years, so if property value prices changed a lot there would be a difference. It might say current year, but the assessment could actually be from a years before.

If the house is new it might be just the value of the land.

If it is a state that has homestead exemptions, then the assessment could be capped at an increase of 3% a year, and so if it is an older house the assessment might reflect appreciation at 3% when the home really went up 30% over many years.

Also, there could be homestead exemptions for the elderly, for disabled veterans, all sorts of reasons.

What state is it?

On the property assessors website it should have a link to an explanation of when they assess and if there are exemptions.

JLeslie's avatar

Oh, I did not answer you about negotiating the price. The price is based on market value, not by what the local government says the property assessment is. However, some people do try to work that into negotiations as part of their argument, but if it is due to exemptions and the county not assessing frequently the assessment is kind of irrelevant.

YARNLADY's avatar

the asking price of a house has nothing to do with the assessment, and often very little to do with the actual value (sell price) of a house. They can ask anything they want.

A house ½ block from me has an asking price of $250,000 in a neighborhood where houses are selling for $160,000. If it sells at that price, the buyer is crazy.

I bought 15 years ago at $160,000 and since then the appraised value has gone all the way down to $125,000 and up to $350,000. It’s a roller coaster. The tax assessed value has stayed pretty close to the original sale price because the law only allows an increase of 1% per year.

BarnacleBill's avatar

Generally what happens is that once a house sells at a certain price, that price becomes the assessed value. You need to look at the date of the last assessment, and then look at the assessment values of houses in the area that have sold within the last 6 months. The $140,000 is most likely what the owner paid for the house. If they have done significant improvements to the house—updated kitchen, bathrooms, addition, replaced all mechanical systems, replaced windows, put on an addition, etc. then it may be worth the spread between assessed and asked, if the houses in the area are selling in that price range. Otherwise, you have room to negotiate. A lot of sellers are still unrealistic about their asking price. There are bargains to be had.

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