The assessed value serves a different purpose. Specifically, the assessed value is used to calculate property taxes. As a buyer, the assessed value gives you an idea of what you can expect to pay in property taxes each year. Before you make an offer on any property, you should factor the expected annual property taxes into your budget. If you can’t afford the taxes on a property based on its assessed value, it’s important to know this before diving in headfirst.
Of course, it’s likely the property taxes on the home won’t make or break your decision. But it’s still a good idea to consider all the costs before settling into homeownership.
The property tax rate will vary widely based on your location. For example, according to data from WalletHub, the average U.S. homeowner will pay $2,375 per year in property taxes. But New Jersey residents will pay a median amount of $8,362 in property taxes annually. The assessed value of the home determines how much your property tax bill is each year.
It’s important to note that oftentimes the tax assessed value doesn’t match the market value of the home.
How Is Home Assessed Value Determined?
The assessed value of a home can have a major impact on your budget. So, how does an assessor arrive at this important number?
Typically, an assessor will look at several factors, including:
- Comparable homes: This involves comparing the value of houses – in the same area – of a similar size and with similar features.
- Recent improvements: A kitchen renovation, bathroom remodel or major addition will likely increase the value of a home.
- Rebuilding costs: The estimated cost of rebuilding a house will affect the assessed property value.
In most cases, property value assessments are conducted using mass appraisal techniques with the help of automated computer programs. After all, assessors often have many properties to consider.
However, assessors will often use the computerized assessment as a starting point. The assessor may adjust the determined assessed value based on the specifics of the home in question.
For example, let’s say an assessor is determining the assessed value of a single-family home with three bedrooms and two bathrooms. Comparable homes in the area are selling for anywhere in the $190,000 –$215,000 range. However, the property in question recently underwent a major renovation to update the kitchen and bathrooms. With that, the assessor will likely determine that the property has a higher-than-average value.
