If you’re in the market for buying or selling a home, you may frequently hear three key terms about home value. They are all different, but how? Your Berkshire Hathaway Premier Properties real estate agent will be able to tell you the differences, but here’s a brief outline of what each one means.
Market Value
This is the most probable price that a property will bring within an open market transaction. In other words, this is the price a buyer is willing to pay for any given home, and that a seller would be willing to accept. Real estate agents know how to determine a home’s value, which they do by factoring in these characteristics:
- External characteristics: Exterior condition of home, curb appeal, lot size, home style, and availability of public utilities.
- Internal characteristics: Size/number of rooms, construction quality and condition, appliance quality and condition, energy efficiency and heating/cooling systems.
- Comps: What similar homes in the same area or neighborhood have sold for in the recent past.
- Supply and demand: How many buyers and sellers there are in your area.
- Location: Desirability of the neighborhood, quality of schools, and crime rate.
A home’s market value is a good jumping off point in determining a variety of concerns that home buyers may have. Listing agents use market value to determine a fair asking price. Buyer agents can also do their own homework and see if the approximate value is correct in their minds; if not, they can come up with a different price of what they believe their client should be offering.
Assessed Value
An assessor must place a value on real estate in order for the municipality to levy property taxes on the home. In order to arrive at that value designed for tax purposes, the assessor looks at the selling prices of similar properties, the value of recent improvements (if any), and other factors such as the replacement cost of the property if, for example, a fire were to destroy it.
The assessor then comes up with an assessment value of the home and will deduct any tax exemptions. That number will then be multiplied by an “assessment rate,” also referred to as “assessment ratio.” This is an across-the-board percentage that each tax jurisdiction sets, usually 80 to 90 percent, to determine the taxable value of the property.
The higher the home’s assessed value, the more will be paid in tax.
Appraised Value
When a buyer meets with a lender to obtain a mortgage for a property, the lender takes many factors into consideration when he or she determines the property’s value, such as the neighborhood, the value of similar size and construction properties, types of fixtures on the premises, layout of the property, etc. This value is what the lender will use to determine whether to move on to the evaluation of the potential buyer’s creditworthiness.
Contact Berkshire Hathaway Premier Properties
To learn more about assessed, appraised and market value, contact Berkshire Hathaway Premier Properties today at 832-626-4889. Our agents would be happy to walk you through the process.