When searching for properties many first time home buyers often get confused about how the value of real property is determined. It’s falsely assumed that the assessed value (on a listing sheet) is also the “market” value of that particular home. Here in the city of Boston and throughout Massachusetts that couldn’t be further from the truth.
The “assessed” value of a home is the value the local municipality places on the property for the purposes of assessing taxes. The government (simply put) looks at the size of the lot, the square footage of the home and any improvements recently done and determines the value for assessing taxes. The total tax bill given (annually) to that particular property is determined by dividing the total amount needed for the municipality by the local homes and the associated values.
The “market value” or true value of a piece of property is determined by supply and demand and a few other factors. Market value is based on what the market (or able and willing buyers) are willing to pay for that home. The market value can be higher or lower than the assessed value.
In Massachusetts the market value is often much higher than the assessed number. Taxes can be paid on an assessed value of $200,000 while the home recently sold for its market value of $300,000. Local governments typically review assessed values annually and adjust accordingly.
One last point. The “listing price” for a home is not always an indication of the property’s value. A seller’s real estate agent can list a property for any number they want. Unless they can find a buyer to pay that price, the listing price is just a seller’s wish.