Is my home worth tax value? I get this questions a lot. I find myself having to explain the definition of tax value and what it means to the homeowner very often.
Tax value is used by local municipalities for the purpose of collecting taxes and is assessed “ad-valorem”, Latin for according to value.
The method of determining this value varies by municipality. It is important to note that the municipality will not contract with a licensed appraiser or other service professional to determine this value. The person who does the assessment is an employee of the particular municipality. The tax value is then multiplied by the tax rate to determine the tax bill for that year.
Tax Value and Fair Market Value (FMV), being what the house should sell for under fair market conditions, is NOT the same thing! There have been several articles written on the gap between tax value and market value in Wake County.
Wake County currently assesses tax value once every eight years and the last time it was assessed, as of this writing, was in 2008. The county was aggressive in their valuation because they were trying to account for lost appreciation during the boom of the mid-2000’s.
So why is this number not accurate? The municipalities are always in need of revenue and hence will try and charge as much as possible. Also, the assessor does not enter the property and inspect the interior. The condition of the property, whether good or bad, is not taken into consideration when making a tax assessment. There are properties that are outside of city limits so the city will not provide water & sewer services, hence there is not as much need to tax this property as heavily.
Is Tax Value Worthless?
Not necessarily. Tax value can give you a range for an approximate value of a property. For example, I recently had a seller call me on one of my “Sell Your House Fast Raleigh N.C.” ads. She was having some trouble with a an investment property out in Knightdale, NC. It was a 3bd 2ba ranch home on a nice lot that had a market value of about $100,000 in average condition. When I originally spoke to the seller, I looked up the property on the county records http://services.wakegov.com/realestate/ and I saw the tax value was $120,000. I knew the property was going to be worth less than the tax value but this information did give me a bench-mark to start the conversation.
Also, I focus on single family houses with a value of $100,000 – $200,000, so this told me that this was the type of property I was looking for. If the seller had said I think the house is worth $150,000 in top shape, I would have said thanks for calling. The assessed value gave me a starting point to give me an idea of what I was working with.
Sometimes there are properties located in rural areas where there are not many comparable sales within a reasonable distance from the subject property. The tax value can you give you point of reference when and if there is nothing else at hand.