How to Assess Home Value: A Step-by-Step Guide

Calculating your property’s value might feel like solving a puzzle with too many pieces. But for any homeowner looking for a deeper understanding of their property taxes, a crucial step is to assess home value and know its fair market value. After all, what you pay in property taxes hinges on what the government and third parties believe the property is worth.

So, what goes into assessing home value? Demystify the process, be confident in tackling property assessments, and fully understand your tax bill.

What Does It Mean to Assess Home Value?

Assessing home value involves determining the worth of a property based on multiple factors. Local tax assessors typically use this assessed value to calculate property taxes. Accurate valuation matters for funding local government operations, including public school systems.

Before we move on, let’s clarify three terms often mistaken for each other:

• Appraised Value: Determined by a professional appraiser, this value reflects an impartial estimate of what your home would sell for on the open market.
• Market Value: This is the price buyers are willing to pay for your property.
• Assessed Value: Used primarily for tax purposes, your local government determines the value of the property. This number is often calculated as a percentage of the property’s fair market value, which changes by location.

Each variation serves a different purpose. For property tax calculations, the assessed value is the one to focus on.

Why It’s Important to Assess Your Home’s Value

Knowing your taxable value has a few perks, including:

• Property Tax Calculations: Your municipality uses assessed values to determine your property tax bill.
• Buying or Selling: Understanding your home’s potential worth helps you accurately price your home or negotiate a fair deal when buying.
• Refinancing or Home Equity Loans: A correct valuation could unlock better refinancing rates or help secure funds for home improvements through a home equity loan.
• Smarter Investments: A clear understanding of your home’s value informs long-term financial planning and wealth-building decisions.

How to Assess Property Value Yourself

Taking matters into your own hands? Here’s a game plan for assessing your property value like a pro (or at least close enough).

Research Comparable Sales (“Comps”)

Check out recent sales in your neighborhood of similar properties in size, location, and condition to yours. These “comps” give you a ballpark figure of your home’s worth.

Evaluate Key Factors

Location, square footage, property condition, age, upgrades (hello, new kitchen!), and local trends all shape your home’s value. Understanding current market conditions can significantly impact your home’s value and future tax increases.

Use Online Valuation Tools

Free home valuation tools can give you a quick snapshot. They are a quick and easy way to start the conversation around home value, but take these with a grain of salt. Use their data with that from a human that knows the local market.

How Tax Authorities Calculate Assessed Value

While tax officials may use similar methods and weigh neighborhood comparable sales, they take a different approach to assigning value than just comps. Your local taxing authority can use one or a combination of approaches to arrive at a value, such as:

• Cost-based approach: Calculates the value of your home based on its replacement cost.
• Income-based approach: Utilizes rental income rates to calculate property value.
• Sales comparison approach: Compare your home to other recently sold properties in the area.

For specific information on how often property assessments change, consult your local tax department.

How to Calculate Assessed Value

The assessed value of your home is calculated as a percentage of its fair market value, known as the assessment ratio. This ratio varies by location. Some states and counties tax at “full value” or 100% market value, while others may be as low as 4% market value.

Formula to Know

Taxable Value = (Market Value) × (Assessment Rate)

Example Calculation

Say your home has a market value of $300,000, and your local assessment ratio is 60%.

Taxable Value = $300,000 × 0.60 = $180,000

And voilà, that $180,000 will be used to determine your property taxes.

How Do You Use Assessed Value to Calculate Property Taxes?

Understanding property taxes can feel like deciphering corporate tax law. It’s simpler when broken down. Here’s a basic primer on how most local governments calculate them:

The assessed value (determined using the formula above) is multiplied by the mill rate. This figure represents tax dollars, either per $100 or $1,000 of assessed value. So one mil could equal $1 for every $1,000 of valuation or $1 for every $100 of valuation. The assessed value, also known as the taxable value, is then used to determine your property tax liability.

Example Calculation:

• Assessed Value = $180,000
• Mill Rate = $15 per $1,000
• Property Tax = $180,000 ÷ 1,000 × 15 = $2,700

This means you’ll pay $2,700 annually in property taxes.

How to Figure Out Assessed Value from Your Tax Bill

Can’t find your property’s assessed value? Grab your most recent tax bill or notice. Follow these steps:

• Most property tax notices should clearly state the property’s assessed value used for taxation purposes.
• Alternatively, look for your statement’s property tax amount and the mill rate.
• Divide the total tax amount by the mill rate (and adjust for “per $100 or 1,000” if needed).
• For example, if your property tax is $2,700 and the mill rate is $15, reverse the formula we went over earlier:

Assessed Value = (Tax Amount ÷ Mill Rate) × $1,000

Assessed Value = ($2,700 ÷ $15) × $1,000 = $180,000

Still unclear? Reach out to your local tax assessor for clarification or additional details. Doing this math helps homeowners verify their property taxes are accurate.

What to Do if You Disagree with Your Home’s Assessed Value

Tax authorities aren’t infallible, and you may disagree with their assessment. If this happens, here are a few steps you can take:

• Research Comps: Gather evidence of recent comparable sales in your area contradicting the assessed value.
• Know Your Rights: Familiarize yourself with local laws and procedures for challenging an assessment.
• Request a Review or Appeal: Submit an appeal to your local tax office with the evidence you’ve gathered.

Professional Help: When to Hire an Appraiser or Assessor

Doing it yourself is great, but sometimes it’s worth bringing in the pros. Here’s when to consider hiring one:

• Private Appraiser: When selling or refinancing, a private appraisal can offer an accurate valuation of your home in its current condition. Expect costs to range between $300 and $500, depending on your location. An accurate appraisal is also crucial during a home purchase to ensure you are paying a fair price. A third-party appraisal also helps when filing a tax valuation appeal.
• Government Tax Assessor: While these assessments are often automatic, you can request a reassessment if you believe your current valuation is inaccurate. The taxing authority may request evidence as to why the home needs a re-valuation, such as photos showing a change in condition.

Common Mistakes to Avoid When Assessing Home Value

To get the most accurate assessment, steer clear of these common pitfalls:

• Relying solely on online tools. They’re helpful but not foolproof.
• Ignoring current market trends and local real estate conditions.
• Overestimating the value of renovations. Not all upgrades add dollar-for-dollar value to the house.

Remember, property values depend on numerous factors, some of which are subjective. Always refer to multiple sources of information.

How to Assess Your Property Value

Calculating your home’s value might seem overwhelming, but it empowers you to make informed financial decisions. From understanding the true worth of your home to preparing for taxes or future sales, taking the time to assess home value pays off.

Not sure where to start? Follow the step-by-step methods in this guide and consult a professional for expert insight when needed. Accurately assessing the value of the property ensures you make informed financial decisions.

FAQs

Can assessed value be higher than market value?

It’s possible, especially if your local taxing jurisdiction reassessed your property during a high market surge. Remember, you can file a tax appeal if you disagree with an assessed value change.

How often is property assessed?

This varies by location but is typically every 1–5 years. Check with the local city or county assessor on their valuation schedule and how they will notify you of the change in property value. Each state has notification rules and processes around assessed value changes.

How to challenge an assessed value if you disagree?

Contact your local tax assessor and submit an appeal, providing evidence like comps to support your claim. Each county and state has a different process, but generally, all ask you to start by contacting the local tax authority.