Knowing your home’s value is essential as it impacts your property taxes, the equity you have in it, and your expectations when selling. However, establishing the value of a home can be subjective—how much the buyer is willing to pay for it versus what a seller thinks they should pay. Hi I’m Michele Irizarry, CEO & Broker of Shore Prime Properties. If you like to stay up to date on the home buying and selling process and other useful real estate topics, please be sure to like and follow Shore Prime Properties. Understanding the difference between assessed value and market value, and how they interconnect, is key to determining what your home is really worth. Here’s a look at how each is calculated and what affects your property taxes most.
What is market value?
This is an estimated value based on how much money a buyer would be willing to pay for a home. This information is valuable for several reasons: it can help sellers know how much to list their home for and buyers decide what they are willing to pay for it and the amount a lender will lend.
Whether applying for an additional loan on your current home, refinancing, or seeking funding to purchase a home, lenders need to determine your loan-to-value ratio before they approve a loan. To do this, they will hire a real estate appraiser, a third-party licensed professional who helps lenders establish what your home is worth. They’re responsible for researching and evaluating recently sold homes—usually a minimum of three closed sales within the past six-month (or longer if needed)—in a specific area with homes similar in condition, age, size, and location, noting any recent updates or renovations. By combining their knowledge of the local market and doing their due diligence to understand the nuances of each property, they can arrive at a fair market value for your home.
Some homeowners may hire their own independent appraiser to gain a clearer picture of their home’s value. In addition, it can assist them in strategizing pricing or establishing the available equity in their home in order to refinance, obtain a line of credit, or seek funds for a reverse mortgage.
How is the assessed value calculated?
While the market value can be used for real estate and financial transactions, the assessed value is specifically for determining property taxes. Each NJ county has its tax laws, so the approach to arrive at this assessment can vary. Generally, each municipality has a municipal property assessor who evaluates current market conditions, the value of neighboring properties, and the home’s sales history. This helps them to decide on a number (some assessors will use an algorithm) that will be used to calculate property taxes within the given tax district.
Unfortunately, these values tend to trail the market because assessments are only done yearly. So if there is a decline in the market, it can take a year or two before that’s reflected in the assessed value. Additionally, when a property sells, it’s not always immediately reassessed since most taxes are paid in arrears. As a result, some homeowners can end up paying too much or not enough. However, you can appeal your tax assessment, if you feel the value given is off. You would need access to comparable sales that sold for less than your assessed value in order to state your appeal.
What affects your property taxes?
Several factors can affect your property taxes, including home improvements, growing communities, and state and local government tax adjustments.
Home improvementsÂ
Significant upgrades to a home, such as adding or renovating a bathroom or kitchen, finishing a basement, or even increasing the size of your home will factor into its assessed value, increasing your taxes at the next assessment period.
Areas of growth
Substantial growth and increased demand for housing in one area will likely cause home values in the surrounding areas to go up, ultimately affecting property taxes.
State and local governments
You may see a change in your assessment if your state government or local municipalities need additional money for schools, road repairs, or other government-funded services, which can increase your tax bill.
 Regardless of whether you’re buying or selling, learning what the average assessed values of homes in your area are and the rates at which they increase can help you determine what your home is worth today in the open market as well as how it will impact your tax rate and affordability. If you have any questions about your Jersey Shore home’s value, feel free to reach out to us here at Shore Prime Properties today. I’m Michele Irizarry, selling prime real estate at the Jersey Shore.Â
