If you are like most homeowners you are curious as to what your current property value is. Even if you have no interest in selling or refinancing your value is a way to keep score of where you are in your ownership. Trying to determine this number can be like trying to hit a moving target. One day you see a number for your assessment which may be different than your purchase price. You see local homes selling in your area but aren’t sure how your property stacks up. If you are confused as to the best way to determine your current value you are not alone. Here are the three main valuation methods and the best one to use.
Assessment.The assessed value is the number that is assigned by your town for property tax purposes. Your annual tax amount is determined from your assessed value along with the mill rate of your town. As a general rule of thumb the value that is assigned is typically much lower than the appraisal amount. This could be as much as 20% below the actual appraisal. How long this number stays on file depends on the local government. In some areas your property is re-assessed annually while in others it is only done once every four years. This is the least trustworthy method in estimating your homes property value.
Appraisal.Unlike with an assessment an appraisal takes the interior of the property into consideration. An appraisal is an estimation of value given recent sales within your local market. The appraisal will compare your property against others that have sold in a recent time frame. The more similar your property is to those sales the more accurate the value will be. The appraisal is considered an estimate because no two properties are alike. It is difficult, if not impossible, to assign value to certain amenities in a property. A home with an extra garage, deck or driveway in one market may hold higher value than one in a neighboring market. When these sales happen is also critical. A sale that happened six months ago may not be relevant today. An appraisal will give you a good idea of the value but really it is nothing more than the appraiser’s best estimate.
Sale.The most basic definition of value is the amount that someone is willing to pay for something. The best way to determine true value is to look at actual sales. This is the case with any large ticket item but particularly with real estate. You may have considered putting your home on the market but only if you can sell for a certain number. While there may be strong data to support that number the only way to find out is by listing. The market doesn’t lie. If there is great demand at your list price you know you are in the ballpark. Actual sales determine real value.
Unless you have an interest in selling constantly stressing over your property value can be fruitless. Keeping track of recent sales can give you a good idea. The only way to truly determine your property value is by putting it on the market.