Assessments, Appraisals and Market Value - What's My Home Really Worth?
County property assessments, appraisals and Realtors’ Market Analyses all purport to value your home, but they are rarely the same. Here’s why.
In every odd year, your county assessor revalues your property based on recent sales in your neighborhood during the 24 months (or 18 months in Park County) preceding June 30th of the year before–called the audit period. For example, this year’s reassessments will be based on sales that took place between July 1, 2020 (or January 1, 2021 for Park County) and June 30, 2022.
The reassessment is based on comparing your property’s characteristics, like room count, floorplan, age and square footage to other nearby properties that sold during the audit period. The updated value is further adjusted for differences in finished vs. unfinished square footage, basement configuration, lot size, garage facilities, date of sale and more.
If this all sounds complicated, it is. The assessor is charged with valuing every property in the county without actually seeing them, so the sheer scale of their job requires an elaborate computer program using regression analysis to take the different property characteristics into consideration to determine a fair value for your real estate. It’s a huge undertaking and it relies on abundant data about every property in the county. Also, their figure is as of June 30th of the year before, not the date you are notified of your new assessment.
The new assessed value is then used to calculate the property taxes that will be levied on your real estate the following year. For example, this year’s new assessment will be multiplied by your area’s mill levy to arrive at your property taxes for 2024.
But is the assessment an accurate estimate of what your property might sell for in the current market? Not necessarily.
Lenders and courts prefer appraisals to support value because they are rendered by state-licensed appraisers following specific protocols to compare sold properties to your real estate. Instead of looking at sales that occurred before June 30th of last year, appraisers rely on more recent data–preferably within the last 90 days–and they select the most comparable properties to the subject property to assure that their valuation is more accurate.
They adjust for differences like the assessor does, but narrow their purview more specifically than the assessor. Because they visit the home, they have the benefit of using subjective information, like views, the setting, the condition of the home, updating/remodeling and more, that the assessor does not have access to.
A shortcoming is that they often do not actually visit the comparable homes that they use in their analysis. They use MLS statistics, their familiarity with the market and comments from listing brokers to rate how closely the sold properties are to the subject they’re appraising.
So, how does a Realtor’s Market Analysis differ from an appraisal? Perhaps the following helps explain it.
If you wanted to know how long it would take to get from Evergreen to DIA, an appraiser would use posted speed limits along the way as criteria to calculate your drive time. They would assume you obeyed traffic laws and drove at legal speeds to arrive at their estimate. A Realtor, on the other hand, would want to know when you intended to make the trip. Using their experience as someone who made the journey at different times on different days, they would adjust for rush hour delays, construction slowdowns and so forth to extend your drive time or anticipate that traffic might actually move 5-10 mph faster without congestion to shorten their estimate if you were traveling early on Sunday morning.
In the same way, Realtors look at your price range and recent buyer interest in your particular neighborhood to increase or decrease their estimate of what the market might bear. They look at sold homes like the appraiser, but expand their purview to include current listings–how they compare to your home, how long they’ve been on the market, etc.--to determine how stiff your competition might be.
A Realtor uses their familiarity with homes (having seen the other sold and currently listed properties first hand) and their up-to-date knowledge of market activity to pinpoint a price that accurately reflects what the market will bear. And they may provide a price range rather than a specific price, due to their respect for the market dynamics at play.
Assessments and appraisals have their place, but a knowledgeable, experienced Realtor’s CMA looks at both sold & actively listed properties and considers current market conditions to determine your home’s real value if you were to list it today.