Assessed and appraised values vs. market value


As the real estate market on the Island has surged and slackened over the past 10 years, both buyers and sellers may find themselves befuddled as they try to determine a property’s real worth today. One variable in helping to determine fair market value — the price a buyer will pay and a seller will accept under reasonable conditions — is the assessed value.

Assessed value is the dollar value assigned to a specific property by the town assessor for the purpose of determining the property tax due. Assessors consider the exterior condition of the property and any improvements that have been made. An appraised value, in contrast, is determined by a licensed real estate appraiser who inspects the property inside and out, then analyzes it in comparison to other properties on the market as well as those that have recently sold.

Assessed and appraised values are often not the same, as the appraised value is a “snapshot” in time and will be affected by current market conditions. Assessed values are neither as current nor as detailed, but both values can help buyers and sellers arrive at fair market value. An experienced real estate professional can help the seller evaluate how both values will affect the selling price of a property.

We asked a number of realtors on the Island how they use assessed values to help determine fair market value for an individual property. Here’s what they said:

Sheila Morse, Island Real Estate, Vineyard Haven:

For the most part, we do recommend that the assessed value of a property be used as a gauge when pricing a property for sale as well as when a buyer is ready to make an offer. We are finding that the assessments are now more on track with the selling prices than they were two years ago. However, there are still some assessments that aren’t quite on par with selling prices. Overall, assessed values are getting more accurate.

Abby Rabinovitz, Tea Lane Associates, Chilmark and West Tisbury:

We use assessed values as a guide for sellers who are pricing properties for the market as well as for buyers who are looking to determine value. But we use them cautiously, as a guide, not as an absolute.

In some towns, most properties are selling within 10 percent of assessed value, but even in these towns there are exceptions. Certain market niches are likely to vary more assessed value than others. For example, sometimes sales under $1 million are almost all within 10 percent of assessed value, but sales over $1 million diverge considerably more. That’s not surprising since whenever there are fewer or no comparables on which to base an assessment, it’s difficult to hit a “fair and true” market value.

Overall, I think the assessors are striving to assess properties accurately and are doing an excellent job. But in this market there are unique properties that are tougher to assess without actual comparable sales to establish the value.

Doug Reece, RE/MAX on island, Vineyard Haven:

The assessed value of a property does, sometimes, have a direct relationship to market value. However, each town and each specific location must be examined carefully. For example, in the spring 2010 market, homes in Katama were selling at 2 to 10 percent over the assessed value, while in Oak Bluffs, homes were selling at 8 to 15 percent below assessed value. In West Tisbury, some homes sold over assessed value while some sold far below. The bottom line: There is no rule of thumb when it comes to comparing market value to assessed value. Each property must be examined on a case-by-case basis.

Lisa Stewart, Lighthouse Properties, Oak Bluffs:

We often provide comparisons of assessed values vs. selling prices for our buyers and sellers. So far this year, out of 242 sales, selling prices have been 111 percent of assessed value, with February (28 sales) being the only month that was below 100 percent. Selling prices are 92 percent of asking prices year-to-date.

We have seen property selling below assessed value when there is no unique feature to set it apart from others, for instance, water, location, craftsmanship, etc.

Art Smadbeck, Priestly Smadbeck & Mone, Edgartown:

The assessed value is supposed to be a value that reflects what real property is worth on the open market in a given location at a given moment in time. Assessed valuations, therefore, can be 12 to 24 months old. Knowing when a property was last assessed can be a rough guide as to present value if one has an idea of where the market has gone since that last assessment was done.

Generally speaking, in a declining market, one would expect assessed values to be actually higher than present market values, and, in a period of rising prices, one could expect present values to exceed assessed values.

We can use ratios of recently sold properties to their assessed values as a guide to price expectations for a similar property in a similar location. Towns in Massachusetts are regulated by the state. The state continually monitors towns for accuracy. This close scrutiny is one of the reasons that we can rely on the accuracy of assessed valuations. It is important to note that assessed valuations are not appraisals and, therefore, should only be thought of as a rough guide. Appraisals are custom valuations by licensed appraisers on individual properties. Assessed valuations are general values placed on properties in a neighborhood and, in addition, are not current.

Neal Stiller, Cronig’s Real Estate, Vineyard Haven:

Assessed values, more often than not, lag behind current market conditions and can, therefore, lack accuracy. Assessments are supposed to represent the correct value of a property but they struggle to keep pace with the actual market.

In this market, many times a seller wants a price that is equal to or exceeds the assessed value, when, in fact, his home may be worth much less than the assessed value. Years ago, properties usually sold for much more than the assessment. Now we are seeing the reverse to often be the case.

We, as brokers, can use assessments as a starting point but then have to figure out by what percentage that assessed value is actually off of the current market value. Appraisals, on the other hand, should be more accurate as they use the most current sales and market conditions to determine value.

Jim Feiner, Feiner Real Estate, Chilmark:

Using assessed value to determine market value is very tricky in a market like this. Each property has unique value. Appraisers use a different approach than assessors to pinpoint that value. Historically, assessments lagged 10 to 15 percent behind market value. Now, with changes in the market over the last few years, assessments are often higher than sales prices by approximately 10 to 15 percent. The relationship between assessments and market value is all over the place.

Sean Federowicz, Coldwell Banker Landmarks Real Estate, Vineyard Haven:

There’s no black and white answer as to how assessed values can be used to arrive at a market value for a property. In determining the market value of a home for a buyer or seller, we have to look at the micro-market within each town. How does a Cape on Hines Point in Vineyard Haven compare to a similar Cape in the historic district of town? How are actual sales behaving within each township relative to assessed value? Then we extrapolate. We look at the ratios between asking price and assessed value and between sales price and assessed value. It’s not a pure science. A licensed appraiser can provide a more technical valuation based on current market conditions. Assessed value is one variable in the analytics of the valuation process.

Karla Araujo, a frequent contributor to The Times, divides her time between Oak Bluffs and Washington D.C.