FAQ - Why is This House Assessed So Much Lower than the Asking Price?
In order to fully comprehend the value of a home versus it’s assessment, there are a few concepts to consider…
When talking about appraised value, this refers to what a property is actually worth. In general, the appraised value is what it is that a buyer is willing to pay for a property when it is sold. The assessed value, however, is nothing other than a municipality's best guess at a property’s value – but only as it relates to how much they can increase the municipal tax coffers. In general, most people assume that there is a 1:1 correlation between the appraised value and the assessed value of a home. Unfortunately, the assessed value of a home is often imprecise for any number of reasons.
For starters, (assuming that you’re not married to one) have you ever even seen a tax assessor? Most homeowners would readily acknowledge that they've never actually had one walk through their property. A town official would therefore have no idea whether or not the kitchen is new or reminiscent of a time when Barbara Billingsley was serving brownies for the Beaver…
Also, savvy homeowners will often challenge the assessment by going before the Board of Assessment Review. In doing so, they hope to drive down the assessed value of the property and, by extension, drive down the annual total of their tax levy. This, however, does not necessarily mean that the house is worth less to a prospective buyer.
Conversely, elderly homeowners often times have inflated assessed values. Why? As a result of having resided in their home for 20+ years, the assessed value is continually driven upward while, at the same time, the homeowner may have limited ability or understanding of the opportunity to challenge the town's valuation.
So, if the assessed value isn't a great indication of the actual (or appraised) value of a property, then what is the significance that one can derive by looking at a property's assessment?
The assessed value of a property is very important for perspective buyers to understand. If a property is being sold for $200,000 but has an assessed value of $170,000, perspective owners need to be aware that their tax levy will, more likely than not, increase within a year and half of transfer of title. For example, if a property is assessed at $230,000 but is being sold for $200,000, it would be beneficial for the new homeowners to challenge the assessment in order to drive down their tax bill and save a few extra bucks in their pocket. I’m sure you won’t be surprised to hear that the town assessor’s office will not simply reduce the assessed value in accord with the sale price of a given property. Instead, a challenge needs to be made. The good news is that NYS law mandates that the assessed value of a property, if challenged, needs to equal the sale price of a property made as a result of an arm’s length transaction. So, if you’re thinking that you’ll purchase your mother’s $200,000 home for $50,000, I’m sorry to say that your taxes will not go down, as that is not considered an arm’s length transaction. Worth a try!
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