When sellers and buyers are looking at homes, its no uncommon for the tax value and asking or closing price to be wildly far a part. This has happened a good deal in the last few years as the market has been on a steady and fierce upward trend. As an agent, I get asked about this and what causes it. Todays episode we are going to explore what causes it and how this info can equip you in your real estate transaction.
It’s not uncommon for Tax value and Market Value to be confused with each other. They can be miles a part and its understand-able for a a buyer a seller to wonder why.
Let’s chat about the tax value first. One of the main ways a county raises funds for services is through property taxes. The tax value of your home is set by the county and is reassessed every 10 years. The tax is a percentage of a dollar and the county multiplies that percentage by your home’s tax value.
The percentage is different in every county. In Camden, where I live, the tax amount was recently raised to make room in the county budget to build a new Camden High School. In other surrounding counties you may also have a city tax that is also added to your annual taxes. This is what happens when you live in Elizabeth City vs living just in Pasquotank county.
It should be noted that when you are searching for homes in a larger geographic circle, you should consider how the tax rate is going to effect the monthly payment and the ability to resell later. Sometimes you can get a similar house with less overall cost by looking in a different county….BUT in real estate location is EVERYTHING and you must consider what you are getting in return for the added taxes. Schools and county services are a direct impact of taxes and are a top decision factor for real estate.
That was a long explanation of tax value. Fair market value is really a much simpler explanation but much harder to nail down. Value in all things is simply what a reasonable buyer would pay for an item on a given day.
When looking at that simplified definition of value, 2 things should jump out at you. A reasonable buyer is considered an arms length transaction….no special pricing for friends or relatives or quick sells that are atypical in reasoning. The second is the term “on a given day” That value is based on the specific day, because anything can happen to impact value of real estate.
Imagine what would happen to home values in Hertford, if a major manufacturer announced tomorrow that it was going to be moving its production facility to Perquimans County. Overnight the value of homes would go up as demand for homes increased. Now imagine that the Coast Guard decides to downsize remove most of the base personnel to another location. Home values in our entire region would be dramatically impacted almost instantly.
Tax values only change during reassessment years but market value can change instantly based on supply and demand, that is affected by the local news and events
Chris Whitehurst
Rose & Womble
252 312 2263