REALTORS

Tax Assessment Analysis

The tax assessment has nothing to do with the value of your home in todays market. A tax assessment is simply the value placed on a home for tax purposes. Your homes annual taxes are based on that assessment. A formula is used to arrive at the assessment and this is done every year in Northern Virginia. If someone improves a property and permits are pulled, that gets factored into the new assessment. An assessment could be wrong if someone finishes a basement themselves or builds an addition that permits weren’t pulled for.

I trust in and use the Tax Assessment Analysis to back up my “normal” CMA and it helps me with my price opinion of a home. I have years of experience with this type of analysis in Virginia and in Maryland. This approach has it’s skeptics and there are even experienced real estate agents that have a hard time understanding the value of this type of analysis. Some people focus on things like “that assessment is wrong because it has a deck” or “an assessment has nothing to do with value”. They don’t take into account the law of averages. Some are assessed high and some low. If you throw out 1 or 2 highs and the same amount of lows, the averages usually work out the same.

Tax assessments have nothing to do with value. That being said, a tax assessment IS relative to a home. In any given subdivision, one can compare the tax assessment to the list prices and sales prices to find out the difference as a ratio. When I started in real estate, older agents would say, “value is 120% of assessment” and they meant across the board. All subdivisions and areas are different and they will have different ratios but within the same subdivision, I find, the ratios are VERY similar. As an example, lets take a $630,000 home whose tax assessment is $592,560. By dividing the 630K by the assessment, you get 1.0631834750911300121506682867558 or 106%. If this was the average for several homes that went to settlement in the past 3 or 4 months, you could apply that average to your own homes tax assessment to come up with a likely sales price. For example, your homes assessment of $569,980 X 106% = $604,178.80

Another aspect to this analysis is your data source. For the traditional CMA one has to compare like properties. Since the assessment is relative to the home, you’re able to compare Ramblers, Split Levels, Split Foyers and Colonials. A Ramblers assessment and list price will be lower than a Colonials but the average ratios will be similar. I enjoy looking at the data from many angles. I compare:

• List price to the assessment
• Sales price to the assessment
• The lowest and highest ratios to develop a range
• The sales price ratio after seller concessions
• The ratio timeline increase or decrease

These are the minimum I consider when trying to find the “right price”. In my experience, the analysis fails when the home has either just a few unique or no comps or when the subject property has an incorrect tax assessment. It has always been one of my favorite tools as a real estate agent and works to back up my regular CMA in most subdivisions.