With real estate property values on an economic rollercoaster, it can be hard to figure out what your home is really worth today, and whether your taxes are in line with the current value.
Market value vs tax assessment
First, you should know that property tax assessment is considerably lower than market value. Property taxes are assessed to pay for hundreds of government services that directly impact your and your community, like police and fire personnel salaries, road improvements and public school funding. The method the tax assessor uses is somewhat subjective, but represents a starting place you can use to figure the value of your home.
Determining market value
Market value
Market value is essentially determined by whatever the market will bear, or how much buyers would be willing to pay. Market value is heavily influenced by aesthetic and neighborhood issues including:
- Curb appeal – how your house looks to a potential buyer. Never underestimate the value of cosmetics. For most buyers, this is an emotional decision.
- Condition of the neighborhood – likewise, buyers will be more likely to pay more if the is or appears to be safe and well-tended.
- Location – convenience usually plays a part in the decision of what area buyers choose, so areas such as proximity to schools, shopping and golf courses play a part in the decision process.
One consistent way to determine what your home is currently worth is to find out what local homes in the same neighborhood with similar values such as size of lot, square footage and number of rooms has most recently sold for. Discard data from the ends of the spectrum, extreme lows and highs, because the decision to sell low may have mitigating factors such as the death of the owner or liquidation of divorce assets, and high numbers are not always indicative of a trend. Consistently rising or falling numbers, however, should be carefully monitored.
Property Improvements
While upgrading usually do not affect the tax assessment of your home, improvements do improve the home's marketability and can serve as effective selling points to set your home above others on the market. One thing to note is that outdoor pools rarely increase the value of your home to such an extent that you enjoy a return on the investment.
Historical value
If your home has been declared historically significant, this can work either for or against you with regards to tax, depending on location. Before purchasing a historic property, check with the local tax assessor's office to determine what impact, if any, this will have on your taxes.