The Right Price – What About Tax Value?

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Everyone is looking for the right price in real estate.  If you’re selling you want the best price for your property.  As a buyer you want great value and don’t want to overpay.  As a full-time REALTOR, I meet a lot of buyers and sellers who face misconceptions about what affects a property’s price.  Since these are pretty common misconceptions I wanted to start a series of posts to help clear them up.

One of the top misconceptions relates to a property’s tax “value.”  In North Carolina’s Triangle region, property taxes are based on a valuation that’s only done once every 8 years.  Since it’s a massive project that involves coming up with a figure for every single piece of property in a county, it’s not necessarily the most intricate and detailed calculation.  It’s the county’s approximate take on what the market value of that property might be on the valuation date.  For example, in Wake County (where Raleigh, Cary, Morrisville and Apex are located), these assessments were last done in late 2007 and went into effect as of January 1, 2008.  For example, if Wake County’s assessment models thought that a property was worth $300,000 in late 2007 that property’s taxes would be based on  a tax valuation of $300,000.  If the combined city and county taxes rate for this hypothetical Wake County property were 1.0 per $100 of valuation then the taxes would be $3000 per year.  While the tax rate can change, the tax valuation usually only changes every 8 years.

Because these assessments are not the most exact and are only done every 8 years, they aren’t really useful in pricing a home or determining what to pay as a buyer.  Yet the tax “value” shows up on the information sheets that many REALTORS provide to clients while touring homes or setting a price, so many clients ask about the tax value.  Sellers ask me about tax “value” when we decide what price to set for their property.  If an asking price is above the tax “value” buyers sometimes feel that a home is overpriced.  If the home is listed below a tax “value” then a buyer may wonder if there’s something wrong with a property or may sometimes mistakenly feel that a property that’s still somewhat overpriced is a “good deal.”  The reality is that price is determined by what a seller is willing to accept and by what a buyer is willing to pay in TODAY’s local market.  It’s constantly changing and isn’t determined by the tax valuation – it’s based on up-to-the-minute information about the local market.  While it’s useful to know what your taxes will be based on, that’s really the only use for the tax “value” when you’re selling your house or on the market for your next home.

Hope this helps!