I wanted to take some time to touch on the subject of Understanding Market Values. Before we go into what makes up Market Value, let’s talk about what does not make up Market Value…and that would be Tax Value.
When your Realtor discusses the price homes are selling for as related to current tax value, they are really telling you how our overall market is doing in the Triangle area. I bring this up because an alarming number of buyers seem to think that a home should sell for its tax value or less. This is not the case at all. While we may review how homes in the area are doing with regard to tax value, each home should be looked at on its own merits.
Tax values are determined by our county tax assessors’ offices for the purpose of establishing a standard in order to collect property taxes. Tax assessors rarely go into a home at all. At best, they will sit in their car on the street and maybe walk around the outside of a house…and that’s it. This is not a careful analysis of an individual home’s worth. We’ll call it more of a “drive by” analysis.
In Wake County, our tax values are usually reviewed and altered only once every eight years. Our last change to tax values occurred in 2008 and the market had improved so much that our tax values went up astronomically in many cases. Many of us had to go to the assessor’s office with an actual appraisal in hand to get our tax value lowered. Then, of course, the market tumbled, so in the years that followed, you would see homes selling for significantly less than the tax value. Our market has been, and still is, recovering nicely. Now, you are likely to see a home sell for more, or even much more, than the current tax value.
A home’s actual market value is really determined by what similar homes in the same neighborhood or area are selling for. Market value is what a buyer is willing to pay for a home. One buyer may not want to pay more than tax value, but other buyers will want to pay more and while the first buyer holds stubbornly to that erroneous correlation between tax value and market value, the homes that they really want will be purchased by the other buyers.
Next time: We will delve into what really determines Market Value.