There are a variety of terms used to describe the value of a property and those terms are not interchangeable. It helps to understand the different definitions in order to recognize what each term in referring to.
- Market Value is whatever someone is willing to pay for an item at a specific time. It requires an “arm’s length” transaction, meaning that the parties don’t know each other or have other affiliations that may influence their roles as seller and buyer. A market value requires the item to be exposed to the market for several buyers to have an opportunity to decide if an asking price is too high or too low.
- The Assessed Valuation (or Tax Assessors value) is used to divide the county budget among all the properties, based on some percentage of all the values in the county. The assessor’s valuations have a time lag; valuations set in 2016 reflect what took place in 2015 and are used to collect taxes in 2017. Because of that lag the Assessed Valuation generally doesn’t reflect current market conditions. They also may not reflect any improvements to a property that might have been done by an owner. Only some improvements require permits and most are not reported to the assessor. Also note that the assessor’s valuations vary widely county by county. The best way to use assessor’s valuations is when comparing other properties to that same index in the same county.
- Automated Valuation Models (AVMs) are a tool that accesses computerized records with the county, title offices and other sources and provides an estimated value. This tool is often used by insurance companies and by out-of-state lenders. Again, it doesn’t reflect current market conditions, conditions of all properties may not be reported, and these models are unable to finesse certain variables such as views or surrounding neighborhoods. A familiar version of this method is what Zillow.com offers to provide ‘Zestimates. Redfin offers a similar model. It is most useful as a tool when comparing other properties to that same index, although there can be a widely varying degree of accuracy. In short, if you want to know the market value of your property (what buyers are likely willing to pay), automated valuations fall short.
- Appraised Valuations are researched on a case by case basis and most often are done when buyers purchase using a home loan. This report provides assurances for a lender and confirms that the property is has a value that supports what a buyer is asking them to loan for their purchase. A licensed appraiser will prepare an in-depth analysis for the specific property. Part of that research involves visiting the subject property, identifying similar properties that have recently sold, viewing those and then adjusting values by adding or subtracting values based on specific features (windows, decks, road noise, etc.) in order to come up with a very precise value…good for that date and that subject. The price for this research is about $600 and is generally paid for by the purchaser as one of their closing costs. If the sale is not completed, the purchaser must still pay for that report, so an appraisal is not ordered until after the inspection is completed and approved. Any property owner can purchase an appraisal and some sellers choose to do so in advance of selling a unique property.
If you would like me to determine current market value for your home, please fill out the quick form below and I will reach out to you to schedule a time to meet. Only when I have looked at your home and learned about all the improvements you have done can I truly determine market value, as all of those listing dollars that your improvements have made need to be calculated;