Fair market value verses town assessment
By Vicki Aubry, Realtor, ABR, SRES, Prudential Prime Properties
Many buyers lose out on great properties because they mistakenly equate the town’s assessed value of a particular property to fair market value of that property. There are a number of reasons why this is so.
Currently the town assessors in most of Massachusetts are trying to determine the residential tax rate for the town and at the same time come up with the assessment for each property; a daunting task to be sure.
The total town tax levy, because of proposition 2½, cannot be increased more than 2.5% without a special vote. Therefore, it falls to the assessor to make a determination of the value of each property. Why not just raise them all by 2.5%? It sounds simple, but new properties are being built each year. Generally, the taxes for those properties are based on the purchase price of the new property so they are considered fully assessed. So of course, that throws off the assessments for the existing properties. Therefore, the assessor has to go back and make a determination of the other properties to fit into the total.
Buyers have the impression that each year the assessor visits each property to come up with an individual evaluation. Wow, that assessor would be super human! Rather, they know the nuances of neighborhoods and styles and ages of homes and make an educated determination of the assessment. As homes age and improvements get done, the potential for the assessment to be off more and more is quite possible as there are some homes that will not be updated and others that will be totally updated making the fair market value gap larger, but not necessarily the assessment.
Buyers must also realize that in determining the 2013 assessments they are working off of year 2011 – the last year they have completed data for when they begin the process. Therefore, there is about a two-year lag time in the process.
The buyer should rely on his buyer’s agent to come up with what is fair market value by looking at the most recent sales of similar homes and making adjustments for square footage, lot size, location, condition, and other factors specific to the home, such as number of garages, if the basement is finished or not, and if there are new updates such as granite counter tops, central air conditioning, hardwood floors, and stainless steel appliances to name a few.
During the mortgage process, the buyer also will pay for an appraisal of the property done by a licensed appraiser for the lender. This is a second very detailed analysis which is done to support the value of the property being purchased. The appraiser also will determine the fair market value of the property by considering recent comparable property sales, not the assessment by the town.
So, for buyers that really want to buy, there are checks and balances to be sure the home you select will fall into the range of fair market value, but you have to get to the point where you make the offer and it is accepted!
For more information on sales process or for a free home buyer consultation, just give me a call!
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