Home Values

Did you know that each home has more than one value? There is the assessed (tax) value, market value, list price, and appraisal value.

These different values often confuse home buyers who are shopping for a home.

To understand the differences and similarities in these home values, let’s start with some basic definitions.

Assessed Value is a valuation placed on a home by the local tax assessor for taxation purposes.

It is a yardstick for the municipality to collect an appropriate amount of taxes to sufficiently cover the expenses of the state and local government.

A home’s assessed Value is often far behind the market value because the valuations are not re-calculated until the next reassessment period. There is no statewide property tax in North Carolina. Instead, all real property is subject to taxation by the county.  This collection of property taxes is the source of funding for the county and city government.

The median property tax rate in North Carolina is one of the lowest in the United States.  By NC law, every area needs a reassessment every eight years.  Assessed Value of a home is often far behind the market value because the valuations are not re-calculated until the next reassessment period.

For example, if the home’s value has been appreciating at 5% a year, the market value could be higher than the assessed value.  On the other hand, if the market values have been declining, it is not unusual to see the assessed value higher than the current market value.

The assessed value of the home is based solely on computer records and comparable property values that sold recently in the same area. Remember, the assessed value is for taxation purposes only.  A personal inspection of the property has not taken place.  Tax Value is not the same as the Appraised Value.  Property assessments and home appraisals are two different things.

Market Value is the agreed upon price between a willing and informed buyer and seller under ordinary circumstances in the current real estate market environment.  It is the highest price which the property will bring when exposed for sale on the open market with the current market conditions.

The following factors contribute to the market value of your property:

1. Neighborhood comps
2. Location
3. Size of home and available space
4. Age and condition
5. Upgrades and updates
6. Local Real Estate Market
7. Economic indicators
8. Interest rates

By analyzing all of these factors, the seller will be able to come up with the fair market value of their property.

Take a Look at the Davidson County Market Watch Report.

List price is the price set by the sellers when they place their home on the market for sale.  Their listing agent looks at several factors to establish the value range on a property before meeting with the sellers.

Here are some of the factors the listing agent considers:

1. Does the home have curb appeal? What is the exterior condition of the property?  Its lot size, home style, and square footage.
2. The number of rooms, construction and appliance quality, and condition of the home’s components.
3. Comps – What similar homes in the same neighborhood sold for recently?
4. What is the competition in the neighborhood, and what is under contract?
5. Supply and Demand – The number of buyers and sellers in your area.
6. Location – How desirable is the neighborhood?

The current environment of the local real estate market is a significant factor to consider when setting the list price.  After this analysis, the agent meets with the sellers to go over the data.  This information will help the sellers set the list price.

Appraised Value is the result of a home appraisal.  A state licensed appraiser completes this report.  It is an evaluation of the home and local market conditions used to arrive at the market value of a home.  Most often, the appraiser will use the “Market Approach” in determining the home’s value.  The appraiser uses recently sold homes (comps) to determine the current value of a particular property.

Most potential buyers have to obtain a mortgage to purchase a home.  After the buyer’s lender receives a copy of the contract, the lender’s next step will be to order an appraisal.  An appointment will be made by the appraiser to inspect the subject property.

During the inspection, the appraiser measures the home and room dimensions, takes photographs of the property, and collects relevant data on the listing and neighborhood.  The appraiser prepares their report from the visual inspection, tax information, and the information on the comparable properties in the multiple listing service that are similar to the subject property.

In most cases, the appraiser might decide to use the same sold listings that the seller and agent reviewed when they arrived at their list price.  In some ways, the appraised value is similar to the fair market value

1. Remember that a home will have different values associated with it. Have a clear understanding of these different home values.
2. The Market Value is the most important value to consider when making an offer on a property.
3. Get pre-approved by your lender. In today’s market environment, if there isn’t a preapproval or prequalification letter with the offer, it is not even considered.
4. Analyze the recently sold homes in the community and how they compare to the property.
5. Understand the conditions of the current real estate market and how that will affect your offer.
6. Know your financial situation. If you are in the seller’s market, there may be heavy competition among buyers for the property.  Know what you can do financially.  It is a mistake to get caught up in a bidding war.  Don’t make an offer beyond your comfort zone.