Assessed Value
The monetary value, also known as cash value, given to an asset, property, home, or any other piece of real estate; this is mainly used to determine its property tax.
What is Assessed Value?
Assessed Value (AV) is the monetary value, also known as cash value, given to an asset, property, home, or any other piece of real estate; this is mainly used to determine its property tax.
How often is this valuation being done? This time period is usually variable; some have a valuation annually when changes are needed (renovation), or whenever seen fit.
When determining the value, the area of location for the property or asset would be calculated based on that area’s course of action.
Further, the calculation of the assessed value can be vacillated as it is now due to each location and individual that conducts this assessment having their way of calculating the worth.
The number given is varied and not fixed due to the variables (changes) present.
A local government assessor would usually be the determiner of the assessed value of the asset or the property that is followed by what the taxation districts require and the assessment rate.
This then determines the property tax that would be paid. This is based on the fair market value determined, the quality and condition of the asset or the property.
Not to be confused with AV, which is the percentage amount of the dollar value of the property, not the actual selling price.
Fair market value, in other words, means the selling price determined based on the property deemed appropriate for both the seller and the buyer.
Example of Assessed Value
An example of the calculation for assessed value would be the market value multiplied by the assessment ratio (assessment rate/ 100). This is how the worth of an asset or property is calculated and valued.
For example, if a property has a market valued at $500,000 and an assessment rate of 75%, we can determine the AV by getting
500,000 x (75/100) = $375,000
Another example would be the following:
The property has a market value of $225,000. An assessment rate of 60 percent out of 100. So, the formula is:
225,000 x (60/100) = $135,000
The AV amount of the property would be $135,000
Another way to calculate:
Assessed value = (property tax bill multiplied by tax rate) multiplied by 100
Why is Assessed Value Important?
It is wise to be in the know about an asset or property’s AV for the following reasons:
- Having an idea of what the asset or property is worth
- Determines the insurance amount qualification of the asset
- The government uses the AV to determine the taxation of property
The assessed value is created based on fixed and variable aspects, such as the property's location.
For instance, the location of the property is a variable aspect due to different districts having different valuation contributors.
Real estate valuation is used to determine the property tax (ad valorem tax). Based on your tax district, a government assessor will be assigned to conduct the calculation.
Some designated government officials or appraisers will determine the AV, some would calculate based on the fair market value, or in an appraiser’s case, they go off the appraised value.
Contribution towards determining the value of AV is as mentioned earlier in this article, such as the size of the property or asset, age, condition, and even the materials that were used.
Role of Assessed Value in Real Estate
If an individual is planning on selling a property, refinancing, getting an equity line of credit, or even determining if home improvements are necessary or not.
It is important to know this value due to:
- Knowing the worth of your property, as well as knowing why your property tax is the amount given
- Can determine an insurance rate for the property
- The amount given determines how much the government needs to charge you in property tax.
- For finding if renovating the property would be worth an investment or not.
- For selling property, knowing the AV is important; this helps estimate how much potentially you can get as net revenue.
Net revenue is the sum after taking the selling price, subtracting the loan balance, and then subtracting the selling cost.
Net revenue = Selling price – remaining mortgage amount- total selling costs.
For refinancing a property, knowing the AV can help in understanding how much of a mortgage you can take.
Whether it is for obtaining a lower interest rate, lower monthly mortgage payment, or obtaining cash from a loan to be used for other important needs.
Regarding home improvements, knowing the AV can help if it would be beneficial to incorporate home improvements if that would mean a higher ROI (return on investment).
An example would be if the property's assessed value is on the lower end in the area; conducting home improvements can help raise the market value, which also increases the AV.
Vice versa, if the AV is on the higher end in the area, there is no need for improvements which can lead to a loss in ROI.
History of Assessed Value
At the end of the 18th century, during colonial times, about 14 out of 15 states had been requiring a tax on occupied land. The property would be taxed based on the state, quality, and quantity in that given state.
How the taxation was collected based on who is responsible for the property. If it was attached to the actual state, or if the county or township took responsibility for the property.
Example(s):
- Concerning the state of North Carolina, the taxed amount would be based on quantity
- Rhode Island was based on land value
- Connecticut was based on how the property was used (for farming, industrial, or residential)
Until the start of the civil war, leaders began to change the practice of taxation and determining the worth of properties; by developing a solution that would ‘Have a taxation system that was one uniform rate.
This specified property was movable, unmovable, visible, or not, even if it was real or unreal.
Once the ball started rolling with this new system of determining value and how much it would cost to continue to own, property taxes are now determined on their assessed value. Which then became a requirement for many states after that.
To summarize, initially, the assessed value had branched off from the idea of property taxation, which then became its branch that contributed to determining the home's worth.
Similarly, we now use AV to determine the amount an Individual pays in taxation on the property or asset. The difference now is that each state or country has its way of determining the assessed value, as previously stated.
Although it may not be the same valuation system from state to state, the process and requirements are the same, with minimal differences in determining value.
Assessed Value Appeals
In this article, the AV is determined by each location (state to state or country to country). So, the process of appealing is different based on the location of the property/ asset.
For understanding purposes, let's look at the state of Washington as an example of the process of appealing. The owner is most likely able to request an appeal for their valuation.
For the state of Washington, the government official or appraiser will determine the Assessed value based on the following:
- Using a cost approach
- Fair market value
- Income Capitalization approach (for properties that are used as gaining revenue)
- The options listed above are in combination. (An example would be if the individual determined the value based on the fair market value and income capitalization)
Before starting the appeal approach, they recommended that the individual try to reach out to the offices before initiating an appeal.
This can be due to some discrepancies, and an official can view the value and help settle disagreements based on what could be an error.
If conducting this step does not help the situation, the individual can then begin the process of an appeal. In the state of Washington, this can be handled by the Board of Equalization.
Assessed Valuation Appeal Process
Individuals can appeal the value amount to their government officials if discrepancies or other contributors could have incorrectly affected the value.
The appeal process varies from country to country, even state to state, so it is recommended that the individual research their own local government’s instructions for how to file this appeal.
The following information is specific to the State of Washington; other states and countries will have their guidelines to follow for an appeal.
1. Complete a Taxpayer petition. That is labeled as the ‘Property Valuation Determination form.’
- Only the property holder, whoever is on the deed of the property, or even an authorized agent, can submit this form.
Going through an authorized agent during this process can be beneficial, especially for those not informed or unaware of the process.
This can make the process much clearer and smoother if the individual is incapable.
2. An appeal can be filed before the deadline dates such as:
- July 1st of the assessed year.
- Within a 30-day window of when the ‘Change of value notice’ was given.
The deadline dates are very strict; if an individual is filing outside the window, it will prolong or delay the appeal.
3. Information needed for appeal:
- The most recent valuation
- Insert if any deterioration is occurring in the property.
- The fair market value of the local properties for sale is below your given valuation.
- The parcel number of the property being appealed
- The county’s determination of value
- Any other information or documents that will support as evidence.
- Map of the location of the property.
- Valuations made prior (trend of valuation)
- Estimate costs (if repairing was needed)
Photographs
It is recommended that all these documents should be collected and kept safe. So that during this portion of the appeal, there will be no delays in attempting to get the proper documents in order.
4. Once submitted, the Board of Equalization must give a decision within a 45-day window. More information about the process can be found here.
Summary
A.V. is the dollar value given to an asset, property, home, or any other piece of real estate; this is mainly used to determine its property tax.
Not to be confused with Fair market value or appraised value.
- Fair market value: The dollar amount the seller and buyer agree on while exchanging property ownership.
- Appraised value: A dollar amount that is assigned by a professional appraiser (usually comes from a local government office).
When is it determined or reviewed; commonly, this time is variable; some have a valuation annually when changes are needed (renovation), or whenever seen fit.
The valuation amount of the property or asset is based on location due to the variable of the process of their decision-making aspects.
This can be Based on the size, quality, location, and what similar properties are selling for in the area.
A local government assessor would usually be the determiner of the assessed value of the asset or the property that is followed by what the taxation districts require and the assessment rate.
As early as the rise in the 19th century, the country needed money from the occupant as a source of income, with the civil war approaching.
Initially starting as just a tax determination system, the assessed value was created later on while the government was developing a solution that would ‘Have a taxation system that was in one uniform rate.
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