How to find the assessed value of property

Billionaire investor Warren Buffet once said that, “Price is what you pay. Value is what you get.” But what does the word “value” really mean?

In the real estate business there are several ways to determine the value of a property. In this article, we’ll take a closer look at assessed value, explain why understanding a property’s assessed value is important for investors, and discuss where and how to find the assessed value of property.


Key takeaways

  • Assessed value of property is determined by a county or municipal assessor.
  • Property assessed value is used for the purpose of calculating property tax.
  • Oftentimes, assessed value of a property is not the same as market value or appraised value.
  • The primary source to find the assessed value of a property is to either use the county assessor’s website or to call them directly. 
  • Factors that may affect the assessed value of a property include square footage, number of rooms, property condition, age of construction, and amenities.
  • Understanding the assessed value of a property is important for real estate investors because property taxes can have a significant impact on the ROI of a rental property.

 

 

What does assessed value mean?

Assessed value is an estimation of property value made by a county or municipal assessor for the purpose of calculating property tax on a home. 

A property value assessment considers factors such as the characteristics of a home, such as square feet, number of bedrooms and bathrooms, construction date, updating, and lot size. The recent sales prices of similar homes in the immediate area is also taken into account when a property value is assessed by the county tax assessor.

However, it’s important to note that assessed value is not the same thing as market value. That’s because property values are only assessed once every year or so to levy property taxes, depending on the county and state a home is located in. 

On the other hand, the market value of a home may increase or decrease depending on the price a buyer and seller agree to at a given point in time. In active real estate markets, the market value of a home may change monthly, weekly, or sometimes even daily.

For example, assume a property was assessed a value of $150,000 one year ago and home prices increased by an average of 15% year-over-year. The assessed value of the property would still be $150,000, according to the county assessor. However, the market value of the home would be around $172,500, depending on the exact price that a buyer and seller agree to.

 

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Where to find assessed property value

The best way to find the assessed value of a property is to go to the source itself. 

Most county tax assessors post assessed property value online. Simply conduct an internet search for “county tax assessor + county name” to locate the assessor’s website for the county the rental property is located in. 

Tax assessor websites usually allow records to be searched using property address, parcel number, or owner name. 

Because assessed property values are determined based on the county’s budget needs, the process the assessor uses for assessing property value may change from one assessment period to the next. Some county assessor websites include an explanation of how property values are assessed, while in other counties an investor may need to contact the assessor’s office directly.

 

How to estimate the market value of a property

County assessors generally use a wide variety of approaches when determining the assessed value of a property. While these methods aren’t always transparent, it can be helpful for real estate investors to understand the various valuation tools available to at least understand the market value of the property. Some of the ways to determine property value include:

Order an appraisal

Lenders hire a professional property appraiser to determine property value when real estate is purchased or refinanced. Homeowners and investors can also order an appraisal to determine the value of a property. 

Home appraisals generally run between $300 to $500 for a single-family home, depending on where the property is located. The designated appraiser search page from Realtor.com is a good way to find a local accredited residential appraiser.

Ask for a CMA

Real estate agents are always looking for clients to work with, and one of the ways agents hope to gain business is by providing a free CMA or comparative market analysis. Also known simply as “comps,” a CMA estimates a property’s value at a given point in time based on property characteristics and features, recent sales, and general market trends.

Research the HPI

The HPI (house price index) uses data from home sales, mortgage originations and refinancing, and the change in home values to estimate property value. Two good resources for calculating a house price index are the FHFA HPI Calculator from the Federal Housing Finance Agency and the Freddie Mac House Price Index

The FHFA calculator allows an investor to select a specific purchase and valuation quarter, while Freddie’s HPI reports historic house price index trends by state and metro area going all the way back to 1975.

Use online tools

Online tools such as the Zillow price-your-home tool and the Roofstock Cloudhouse Rental Calculator are two good online tools to use to help determine the value of a property. 

Roofstock’s Cloudhouse is specifically designed for real estate investors looking for the rental potential of any single-family home in the U.S., even if the property has never been used as a rental before. 

After entering the property address, an investor receives a forecast of potential return based on key metrics such as cash flow, cash-on-cash return, and total 5-year return. Investors can also adjust assumptions to personalize reports and create customized analysis on Cloudhouse.

Check the comps

Browsing active listings on websites Realtor.com, Redfin, Trulia, and Zillow can be a good way to evaluate comparable properties similar to the subject property, or the one an investor owns or is thinking about buying. 

To help create more accurate comps, investors take into account specific features such as square footage, number of bedrooms and bathrooms, construction date, recent remodeling, and lot size.

 

Why assessed property value is important

It’s important to know what the assessed value of a property is because property taxes can have a significant impact on cash flow and return on investment (ROI) of a rental property. 

According to the Tax Foundation, New Jersey has the highest property tax rate at 2.13%, while Hawaii and Alabama have the lowest, at 0.31% and 0.37% respectively. That means a home in New Jersey with an assessed value of $250,000 may have an annual property tax bill of $5,325, while the same home value in Alabama may have an annual property tax bill of just $925.

In some places, the county tax assessor may assign a property a higher value if it is used as a rental home to generate income instead of an owner-occupied residence. Other municipalities may adjust the assessed value of a property to match the sales price when a property is sold. That means that the assessed value of the property shown on the assessor’s website – and the amount of property taxes paid – may be different once the property changes hands.

Knowing what the assessed value of a property is helps an investor to create a more accurate pro forma profit and loss statement, project potential cash flow, and ensure that the market rent is high enough to pay for property taxes and other operating expenses.

 

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Factors affecting assessed value of a property

A county assessor estimates or assesses the value of a property for the purpose of calculating property taxes. The assessed value of a property is multiplied by the assessment rate or mill rate to determine a home’s annual property taxes. 

Some of the factors that may affect the assessed value of property include:

  • Exterior appearance of the home, also known as curb appeal.
  • Interior appearance and condition, such as quality of fixtures, flooring, and cabinetry.
  • Characteristics include square footage, number of bedrooms and bathrooms, garage or carport, attic and basement space, energy efficiency, lot size, construction date, and type of construction.
  • Recent remodeling and updating, such as installing a new kitchen, replacing the roof, and landscaping the front and back yards.
  • Neighborhood quality based on metrics such as school district rating, crime levels, employment rates, and median household incomes.
  • Location of a property within the subdivision, and proximity to local and community amenities.
  • Recent sales of similar properties in the immediate area. 

 

Three ways to look at property value

Here are the three main ways that real estate investors look at property value:

1. Assessed value

Assessed value of a property is determined by a municipal or county tax assessor for property tax purposes. Property value is usually assessed every 1 or 2 years depending on the state and county the property is located in. County assessors consider both property market value and appraised value when assessing property value, along with the upcoming operating budget of the municipality.

2. Appraised value

Appraised value of a property is determined by a licensed, professional appraiser to estimate the current value of a property. An appraisal may be ordered by a lender when a new loan is being originated or a property is being financed, and also by buyers and sellers to help determine property value. 

Factors that affect appraised value may include property size and location, number of rooms, construction date and updating, type of construction, property condition, recent sales comparables, and current market trends.

3. Market value

Market value of a property is the price that a buyer and seller agree to at a given point in time. In active real estate markets, the market value of a property may increase or decrease in a relatively short period of time, based on supply and demand. Buyers, sellers, and their real estate agents use the same factors that assessors and appraisers do to help determine the market value of a property.

 

Closing thoughts

The assessed value of a property is used for the purposes of calculating property taxes, and assessed value is often different from the way that owners and real estate investors value property.

In many cases, a property’s assessed value is less than the current market value and appraised value. Because property taxes have a significant impact on the cash flow and ROI of a rental property, investors look closely at the assessed value of a property when analyzing investment opportunities.

 

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This article, and the Roofstock Blog in general, is intended for informational and educational purposes only, and is not investment, tax, financial planning, legal, or real estate advice. Roofstock is not your advisor or agent. Please consult your own experts for advice in these areas. Although Roofstock provides information it believes to be accurate, Roofstock makes no representations or warranties about the accuracy or completeness of the information contained on this blog.
Jeff Rohde

Author

Jeff Rohde

Jeff has over 25 years of experience in all segments of the real estate industry including investing, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.

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