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My county's property records often indicate a "market value" along with tax assessments. This is typically lower than the listing price of property, and I'm wondering how to interpret it.

For example, I saw one home listed on Zillow at 450k. The property record gives a "2023 Market Value" as 280k, and even specifies 40k land + 240k improvements.

Having viewed the home, I indeed think that the fair price for it would be no more than 300-350k, even accounting for the recent market events. Coincidentally, the seller has listed the property at almost exactly the same price as Zillow's Zestimate. The Zestimate has recently jumped up in price, although the last time it was 280k was early 2021.

The county's website states that the "market value" is based on recent sales of similar properties. Digging a bit deeper, they mention using a Computer Assissted Mass Appraisal (CAMA) program. I have never seen this CAMA, but this sounds like a reasonable and objective way to figure out the actual fair market values of houses.

Based on this, it seems like the county's "market value" is a good indicator of true value. Therefore if the listing price is much higher and the seller is unwilling to negotiate, it is probably unwise to actually purchase that property. Of course, most listings are significantly higher than the government's value, but one would expect that the properties listed for a good price sell quickly while those with inflated asks linger.

There is a similar question, but its answer https://money.stackexchange.com/a/52557/122663 does not apply to my case:

  • I am asking about the market value, not assessed value. For reference, the assessed value for this house is 27k, so it is clearly unrelated to value.
  • The county updates market values every year. It does not reassess "every three years (Maryland)".
  • The county clearly states that they base the market value on similar sales and they do not mention anything about capping the increases.
gomennathan
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1 Answers1

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They're useful, depending on what use you have. The county values are the ones used to calculate the property taxes.

The county assessors usually use automated calculations - i.e.: they don't actually go to each property and evaluate it like mortgage appraisals do, they use statistics about the area and the information about the property listed in the county database (which may not be up to date if there were some changes or improvements done without permits, or cosmetic repairs make it look much better than other similar houses). Amount and frequency of transactions in your area can affect this as well (too few and far apart make it much less precise than frequent transactions with clustered valuations per property type).

A couple of more things may significantly affect the values (although you mentioned these don't apply to you).

  • They may be skewed depending on how the county assessments work. For example, in California the county assessors can only raise the assessed value 2% a year, no matter what the market does. So you may end up with properties valued at millions of dollars on the market, but valued at thousands of dollars by the county and taxed accordingly. This is the result of the California Proposition 13 from the seventies. Other areas may have different rules which may similarly affect how the county assessors operate.
  • Another thing to remember is that county assessors may not reassess every year. In some areas reassessments are done every several years and may lag behind the market quite significantly (in either direction, but people would usually appeal much faster if the market goes down). You're saying that that's not the case in your specific county.

Similarly Zestimate is some automated statistical calculation that doesn't take the specifics of the house into the account. But that is even less precise because it purely relies on data aggregation, and may be potentially manipulated by the owners and real estate agents (using phantom MLS listings or self-reporting data to Zillow).

In the end, in a sale transaction the value is what the seller is willing to accept and the buyer is willing to pay.

One thing I didn't mention, until you pressed a bit more in the comments: staleness of the data.

Zestimate is fed constantly and may change on a daily basis (and some less ethical agents are using that to try and manipulate it similarly to SEO).

County records are updated at best annually, and usually the valuation is set about half a year before it comes into effect for the actual tax assessment. So your county data is much more stale, even if it is much more precise when calculated compared to Zestimate. In a real estate market, information about transactions from 1.5-2 years ago reflected in the current valuation for property taxes may not be very relevant to an actual current sale transaction. The market may have moved since, and by a lot, in either direction.

littleadv
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