What is Assessed Value? So, you’re house hunting or preparing to sell your home and navigating the murky waters of the mortgage landscape. One question that might be on your mind is: how do the powers-that-be come up with an assessed value for a property, and why is it so important? In this article, we’ll take a deep dive into the complex world of property assessment and reveal five key factors that determine the assessed value of a home. Hold onto your hats and let’s dive in!
The Difference Between Assessed Value and Appraised Value
Before we get started, it’s important to understand the distinction between assessed value and appraised value. Though these terms are often used interchangeably, they actually have different meanings and implications.
Assessed value refers to the value assigned to a property by a local tax assessor for the purpose of levying property taxes. Essentially, it’s the value that determines how much you’ll have to pay in taxes each year. You can find more information on assessed values by visiting the Los Angeles County Property Tax Portal.
On the other hand, appraised value is the value assigned to a property by a professional, independent appraiser to determine the property’s fair market value. This is especially important for lenders when they’re deciding whether to approve a mortgage. You can learn more about home appraisals.
Factor #1: Location, Location, Location
It’s the oldest adage in real estate, and it still rings true today: location is everything! The location of your property can have a significant impact on its assessed value. Here are some factors that the tax assessor takes into consideration:
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Neighborhood: A home in a highly sought-after neighborhood is likely to have a higher assessed value than a similar property in a less desirable area.
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Schools: Proximity to quality schools can also be a major factor in determining assessed value. Parents are willing to pay more for a home that’s within the boundaries of top-rated schools.
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Amenities: Access to shopping, dining, and recreational facilities can boost the assessed value of a property. Nobody wants to deal with the hassle of traveling miles away for basic necessities.
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Transportation: Properties near major transportation hubs, like highways, bus stops, and train stations, often have higher assessed values due to the convenience They offer.
To get a better idea of what your property might be worth, check out the Value Check tool.
Factor #2: Home Size and Living Space
The size of your home also plays a significant role in determining its assessed value. Typically, larger homes have higher assessed values than smaller ones. The assessor will evaluate the following factors:
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Square footage: This is the main measure of a home’s size, and it’s one of the most important factors in determining the assessed value.
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Number of rooms: The more rooms a home has, the greater its assessed value will likely be. Rooms like bedrooms, bathrooms, and even bonus rooms can all influence the overall assessed value.
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Floor plan: A property’s layout can contribute to its assessed value as well. Open floor plans, for example, are often more desirable and can lead to a higher assessed value.
Factor #3: Property Age and Condition
The age and condition of your property can also affect its assessed value. As a general rule, newer homes tend to have higher assessed values than older ones, provided their condition is relatively similar. But it’s not just about age; it’s also about upkeep. A well-maintained older home may still have a relatively high assessed value, based on factors like:
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Roof condition: An old, damaged roof can be a huge liability and will definitely impact the assessed value of your property.
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Foundation: If there are evident problems with the foundation, it’s a major red flag and will likely lead to a lower assessed value.
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Systems and appliances: If a home has updated heating, cooling, plumbing, or electrical systems, it can positively influence the property’s assessed value.
Factor #4: Property Features and Upgrades
Custom features and upgrades can certainly add value to a property, but it’s a bit of a mixed bag when it comes to assessed value. Here’s what you need to consider:
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Renovations: According to Investopedia, kitchen and bathroom renovations are among the most likely upgrades to increase your home’s assessed value.
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Outdoor space: The addition of a deck, patio, or other functional outdoor space can also contribute to a higher assessed value.
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Energy efficiency: Upgraded windows, insulation, and energy-efficient appliances can all add to the assessed value. People love saving money on their energy bills!
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Custom features: While luxury finishes and custom features can boost your home’s value, it’s important to remember that some potential buyers might not share your tastes. Overdoing it with too many extravagant upgrades could limit the number of interested buyers and possibly even have a negative impact on assessed value.
Factor #5: Market Conditions
We’ve saved the most unpredictable factor for last: market conditions. Just like any other asset, home prices rise and fall depending on the overall health of the economy. Local market conditions (such as the number of available homes for sale) can also have an effect on assessed value. While you don’t have much control over market fluctuations, it’s important to keep an eye on trends to have an idea of what your home might be worth.
History and Trivia
In the United States, property tax assessment dates back to colonial times when both real and personal property, like livestock and other assets, were taxed. It was only in the late 20th century that property tax assessments began to focus primarily on real property (i.e., land and buildings).
FAQs
Q: What is the purpose of an assessed value?
A: An assessed value is primarily used to determine your annual property taxes. Each jurisdiction has its own tax rate, and your property taxes are calculated by multiplying your assessed value by the applicable tax rate.
Q: Do home improvements increase assessed value?
A: It depends on the home improvement project. Kitchen and bathroom renovations tend to have a higher return on investment and can increase the assessed value. However, not all home improvements will result in a higher assessed value. To avoid overcapitalizing on upgrades that won’t increase your home’s value, it’s best to consult with a real estate professional before undertaking any major projects.
Conclusion
Understanding the assessed value can be a critical aspect of both buying and selling a home, as it affects property taxes as well as provides insight into the value that lenders and buyers consider. As you navigate the mortgage landscape, take note of the five key factors that determine assessed value: location, home size and living space, property age and condition, property features and upgrades, and market conditions. Armed with this knowledge, you’ll be better equipped to make informed decisions and improve your financial future.
Good luck out there, and happy house hunting (or selling)!
