Tax assessments have absolutely nothing to do with home values. A tax assessment is simply the value placed on a home for tax purposes. Annual taxes are based on the assessment which is updated yearly. If someone improves a property and gets a permit, the new assessment reflects the improvement. Assessments are occasionally wrong and should be double checked for accuracy

I trust in and use the Tax Assessment Analysis to back up a regular comparative market analysis (CMA) and it helps me with my estimation of a homes market value. I have years of experience with this type of analysis in Virginia and in Maryland. This approach has it’s skeptics and there are even experienced real estate agents that have a hard time understanding the value of this type of analysis. Some agents focus on things like “the assessment is wrong because it doesn’t have a deck” or “an assessment is always 10% under value”. They don’t take into account the law of averages. Some are assessed high and some low. If you throw out some of the extreme highs and lows, the averages usually work out the same.

While it’s true that tax assessments have nothing to do with value, they ARE relative to each house, the same as the square footage of a house. In any given neighborhood, I compare the tax assessment to the list price and sales price of homes to find out the difference as a ratio. Once I have the average, low and high ratios, I can apply those ratios to the subject property to find out pretty accurately what it should list and sell for. These days, it also helps me learn if a home is likely to appraise or not.

When an agent prepares a regular CMA they have to use similar homes, another aspect to thee tax assessment analysis is the data source. Since the assessment is relative to the home, you’re able to compare Ramblers, Split Levels, Split Foyers and Colonials. A Ramblers assessment and list price will be lower than a Colonials but the average ratios will be similar. I look at the data in a variety of ways. I usually compare:

• List price to the assessment
• Sales price to the assessment
• The lowest and highest ratios to develop a range
• The sales price ratio after seller concessions
• The time line to see if prices are rising or falling
• The Market Absorption Rate

The tax assessment analysis has always been one of my favorite tools as a real estate agent and works to back up my regular comparable market analysis in most subdivisions.