We live in a world where the value of things decreases on a daily basis. The value of money itself depreciates every single year. One asset whose value hardly depreciates is property. Whenever you sell a piece of property, you are almost always sure to get a better price than what you brought it for. No matter the status of the market, the property is one asset whose value will not dip.
You might be looking to sell some property and there is no better time than now. But before you go on calling numbers and counting chickens before they hatch, you need to look at one aspect of your property, which is the value. While it is true that nobody in the market will know the value of your property better than you, the market might see things differently.
The true value of your property is what you deem it to be; however, if you wish to sell it, there are a few things you need to understand about the value of your property. In the sections below, we shall dissect market value versus assessed value so you get a better understanding of the concepts and find the right price for your property.
What is market value?
The market value is what a buyer would be willing to pay for a piece of property in an open market, without the influence of any foreign party. The idea is that if you put up the property in the market for f and buyers to purchase, whatever price the property would fetch would be its fair price. However, this is a very ideal condition. Often we see that people often sell their property to their friends or family, or that the conditions for sale are not ideal.
This is the reason why you will find that most properties in the market are never sold according to their market value.
What you think is the most suitable price for your property will often be in and around the market value of the property. If you are looking to sell your property at a short notice, or if the property is distressed, it may never sell close to the market value. You can assess the market value of your property by comparing it to sales of similar properties in the area in the last six months.
There are also several metrics that can help you find out the market value of the property, some of these are:
* What is inside the house? The number of rooms, bathrooms, the quality of the furnishing, electrical systems in the house, and the energy efficiency are some of the things that increase the value of a property.
* What is outside the house? The exterior condition of the house, the yard or lawn, the style of the house, the size of the lot, and the availability of public utilities are what determines a rise or fall in the market value of the property.
* Houses around the area: The real estate market is always active and houses in and around your neighborhood will have sold recently. The price of sale also plays an important role in determining the price of your house.
* The market: If your neighborhood frequently sees sales and purchases of property that is a good indication of an active market. This activity will help boost the price of your property.
* The locale: Factors such as low crime rates and good schooling also help in the appraisal of the market value of a property.
Looking at these indicators, you can get a fairly good idea of the value of your property. This value will still differ from what is deemed as assessed value’.
What is assessed value?
The assessed value of a property is what an assessor determines to be the value of the property. This value will not be in any way equal to the market value. The reason for this is because the person assessing the property has different metrics of evaluation and they will choose to evaluate it in any way they like. Another important thing of note is that the valuation of the home will always be behind that of the market value as it is never recalculated until the next year.
The most important point of note here is the assessment of the property. Often these individuals will not have a set ideal on how to calculate the value of the property. Each individual has their own criterion and their assessment may not be accurate. This variation often opens up the valuation of the house. You will find that the assessed value of the house may be way more or way lesser than the market value of the house. Homes that have been sold or brought recently will have an assessed value that is likely to be closer to the market value than a house that was sold or brought years ago.
Is there any correlation?
The short answer is no. The long answer is that there is no correlation between the rates because each assessment of a house or property is done differently. The metric of assessing a house is different between individuals. The value they arrive at might not be entirely accurate or anything near the market value.
Market value versus assessed value
The key difference between the two valuations is that market value fluctuates while assessed value does not. The assessed value is immune to the conditions of the market as well as the conditions of the house. It is also often used for taxation purposes.
If you are looking to sell your property at a short notice, keep in mind that you may not receive a price close to the market value. However, if you are receiving cash for the said property, you can get a deal that is close to the assessed value. For houses in decrepit conditions, a lot of investors will be willing to give cash. Note that the value of these properties might be very less in the market, but a cash deal might be your best bet. The difference between the market value and assessed value is what should help you when negotiating a price for your property.