The answer to this question depends on the market. If the market is appreciating as most are now, our answer would be, “Sure! As long as you are comfortable with selling your home for less than what it is worth and thereby leaving money on the table.” If it is a declining market, we would say, “Sure! If you are okay with not selling your home.”
Forgive me for being a little bit flippant in the above paragraph but in the vast majority of cases like those above, that is exactly what will happen. In order to fully understand this, we need to fully understand how your tax assessment works.
Your property tax assessment is a value put on your home by your local government. This value is used, based on the tax rate, to compute how much you owe the local government in taxes. Most localities divide this tax amount into 2 payments broken out over the course of the year. These funds are used to pay for the services your government provides.
What most people do not know is that the assessed value of yourhome is typically computed every other year. So how does this relate to where to price the home you are selling?
When a buyer buys your home, their lender is going to require an appraisal of your property to determine what its current value is. An appraiser will only use comparable sales from the last six month or less. This is where the condition of the local real estate market comes into play.
In an appreciating market where the values are rising, home sales will most likely sell above their assessed value. If you remember, the assessed value could be as much as 2 years old. If the homes have been appreciating since the last assessment, a seller who sells at the assessed value may be leaving a lot of money on the table.
Conversely, if the market is depreciating and home values are dropping, home sales will most likely sell below their assessed value. In this scenario, a home seller who prices their home based on an old assessment takes a major risk in not selling at all. Buyers will base their offers on current market conditions, not an old assessment that might be currently inflated.
When it comes time to pricing your home for sale, please take note that your tax assessment will typically run behind the current market place. Pricing a home is truly an art. When interviewing agents, ask how they came up with a price for your home. Using the assessed value is one small part to determine home value. If the agent used it exclusively, find another agent.
If you’re looking for the right agent to help direct your sale every step of the way, I hope you’ll give me a call!