Property owners in Ada County have recently received their 2023 Assessed Value notices, and to the delight of many, there’s a surprising dip compared to the 2022 assessment. This unexpected turn of events is fantastic news for homeowners, as a lower assessed value translates to reduced property taxes. However, if you’re contemplating selling your home, you might be wondering: does the drop in assessed value parallel a decline in your home’s market value? Let’s delve into the differences between a property’s assessed value versus fair market value.
What is Assessed Value?
The assessed value is the dollar value assigned to a home or other property for tax purposes. It takes into consideration comparable home sales, location, and other factors. In Ada and Canyon Counties properties are assessed annually on January 1st. They are sent to homeowners around the middle of the same year and are due for payment during the following year. Assessed values in Idaho over the past ten years tend to be lower than the Fair Market Value.
What is Fair Market Value in Real Estate?
Fair market value (FMV) in real estate is the price that a property will sell for in an open market, in other words, what a buyer is willing to pay for a home and a seller is willing to accept. Market value reflects what a property could sell for, irrespective of its assessed values. Relying exclusively on assessed or appraised values may lead sellers to misjudge and potentially misprice their property. Determining a home’s market value involves a nuanced analysis, considering various factors:
- External Characteristics: Elements like curb appeal, roof and garage, lot size, home style, and the availability of public utilities.
- Internal Characteristics: Sqft, Bed/Baths, updates, appliances, special features such as RV parking, views, shops, etc.
- Mechanicals: The age and condition of the HVAC, water heater, plumbing, electrical, etc.
- Comparables (Comps): Understanding recent selling prices of similar homes in the same area is crucial for a realistic market valuation.
- Supply and Demand: The dynamic between the number of buyers and sellers in your area influences the perceived value of your property.
- Location: The neighborhood’s desirability, the quality of schools, and the local crime rate all play a role in determining market value.
According to the Ada County Assessors website, assessors estimate what a typical buyer would reasonably pay for a property on January 1st of the year. Assessors do not consider updates inside the home, such as remodels, new electrical work, plumbing, or new flooring. Given that the Assessment Notice is mailed six months after the assessment, it quickly becomes outdated compared to actual market trends and we see bigger gaps or differences between assessed value and fair market value. We saw this firsthand in 2022. According to the Property Value Flyer that accompanied the 2023 Assessment the assessor wrote, “Due to the timing of assessments, last year’s value did not capture 2022’s peak market conditions.” The real estate market peaked in May 2022 and then prices declined, but the assessment had been decided in Jan 2022 when home prices were still increasing.
So, if your assessed value doesn’t align with your expectations, there’s no need to panic. Assessments primarily serve tax purposes. Home buyers and sellers, however, focus more on market value, recognizing that the true value of a home is subjective. It ultimately boils down to the agreement between the buyer and seller. Your neighborhood real estate professional will be able to provide you with accurate market trends and comparable homes to accurately price your home and get it sold.
Curious about the market value of your home in today’s market? I offer free, in-person consultations to get your home’s current market value and what you can expect during the process. Set up a time for a consultation here. In the meantime, make sure to follow me, Jennifer Louis, Boise Metro Real Estate Expert, and local relocation guide on Instagram, Facebook, or my blog for fun facts about Boise and of course a few things real estate. (208) 509-9122 or firstname.lastname@example.org.