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Difference Between Assessed Value and Home Asking Price

What is the difference between the assessed value of a property and the asking price? If you buy a home for more than the assessed value does that mean you are paying too much?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

It is not unusual for there to be a discrepancy between the assessed value of a property according to public records such as property tax rolls and the listing price of a property asked by the home seller. Additionally, please note that the assessed value of a property is different than the appraised value of a property provided by a certified appraiser.

There are multiple reasons for the difference between the assessed value of a property and the listing price of a property that is for sale. The assessed property value is generally based on the price the owner paid for the home and the overall home price appreciation in an area. This value may not accurately reflect the specific details or characteristics of an individual property.

You typically see a greater disparity in the assessed value of a property and the asking price under the following circumstances:

The owner has made significant improvements to the property

Home values in a neighborhood have increased over a relatively short period of time

The owner purchased the property for a low price a long time ago (as long as the property has been properly maintained)

The dynamics of a neighborhood change, making the area a more desirable place to live

Additionally, in some cases you simply have an aggressive home seller that is seeking a sales price for the property that is far greater than the fair market value of the property.

When you buy a home, you should be focused on the current fair market value of the property which is supported by the appraisal report ordered by the lender when you get a mortgage. While the assessed property value is based primarily on the past purchase price and the asking price is set by the seller, the appraisal report provides a fair market value of the property based on numerous factors such as the current condition of the property, amenities and comparable home sales in the area.

In short, the appraisal report provides a property value based on extensive information and analysis. This is why when you apply for a mortgage, the lender focuses on the appraised fair market value as opposed to the property list price or assessed value.

Additionally, the appraised value of the property is one of the factors that determines what size mortgage you can obtain. For example, if you agree to buy a home for $150,000 but it only appraises for $100,000 then you may not be able to qualify for a large enough mortgage to finance the purchase. This also illustrates why it is important to not overpay when you buy a home.

Review What is an Appraisal Report?

If you are concerned about overpaying for a home, as a first step you can use real estate websites to review estimated values for the property. While these websites only provide an approximate property value, the information may be helpful to understand what the property is worth.

Your best approach to avoid overpaying when you buy a home, however, is to work with a realtor or real estate agent with local knowledge and who has experience with the type of property you want to buy. These professionals can use their market knowledge to offer a more precise assessment of the value of a property before you submit an offer to purchase.

An experienced realtor or real estate agent can also help you understand why the market value for a property is different than the assessed value according to tax records. Understanding this information can help you save you money and protect your interests when you negotiate the purchase price with the property seller.

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About the author

Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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