FMV And Tax Assessment...how Do They Compare?
In residential, is there any way to determine a FMV based on the tax assessment, or is FMV determined by the market conditions?
For example, a distressed house in a 'hot' area has a tax assessment of $135,000. Is this based on a percentage of the estimated sales price? Or, is it a number based on a county assessor's formula?
Or am I better off pulling comps?
Thanks-
W
writergig
This is all subject to the area of your investment location! I never use a property assessment as determining market value! As an investor I want to know what the property will retail for on the open market and the only way to determine this fact is to evaluate what the current market standings are by obtaining recently sold comparables as compared to the subject property and it locality.
I do use the property assessment in all my market areas to determine if I want to pursue the deal. Let me give you an example of what I am talking about:
Through research in one county, I have found that the county appraised values are 15 to 20% below market value. This will vary from subdivision to subdivision but it provides an average to evaluate with.
The way I determined this was by keeping track of HUD sales, comparables that I have gathered from other dealings and reviewing properties that are listed in real estate magazines that have sold and placing this information in a data base.
I still use actual comparables as my final decision-maker! This is especially helpful in high foreclosure markets like Indiana and Texas as the large amount of foreclosures have a habit of driving price values down almost form month to month.
[addsig]
Thanks JM-
The comps do seem to be the best determining factors.
It's interesting to see the vast difference between assesment and FMV in a hot area.
I'm sure the gap is much smaller in a 'bad' area.
-WG