What is Market Value vs Assessed Value in Philadelphia
When it’s time to sell your Philadelphia home, there can be some confusion when determining the value, and determining your listing price. There are multiple ways to estimate the market value of your house to help establish your listing price. Two of the more common methods used by Homeowners and Realtors are appraisals, and having a Realtor prepare a Comparative Market Analysis (CMA). It’s important to understand the difference between Market Value and Assessed Value. There are actually quite a few ways to estimate value, including using the assessed value from the County (with some Math). Knowing the differences in these home value tools can help you set you set your ideal asking price to sell your house.
What is Market Value?
Take all of the various online tools and calculators, expert opinions, CMA reports, and appraisals, with a big grain of salt. The gold standard definition of Market Value is 1) what an independent buyer would pay for the house, 2) with all available public information, and 3) in an “arms length” transaction. If 1 of these 3 elements is missing, then the market value will be lower.
What is Assessed Value?
Assessed value is the dollar value assigned to a property by a local government entity (usually the County) to establish the starting point for calculating property taxes. The assessed value is typically lower than the market value, and a ratio known as millage is used to calculate the taxes that are levied on that property.
Understanding how the assessed value is calculated can be a confusing. County property assessors give values to homes for tax purposes. However, the process to assign the value is often done every 5-10 years, sometimes longer. The more time that has elapsed, the less accurate the values. To keep up with the market value, the County will adjust the millage ratio. The difference between the assessed value and the market value is known as the equalization rate. This rate is used by the county to figure your actual property value.
What about the Appraised Value?
Your appraised value can differ from both the Market Value and the Assessed Value. In fact, it’s extremely rare for all 3 valuations to be the same. A full appraisal is done by a licensed professional, with an interior and exterior inspection of the property, to review the quality, size, and condition of the home. While appraisals won’t be 100% correct all of the time, it is also the opinion of one independent person. There are many other ways to to calculate an estimated value based off of your home’s history and market conditions.
How about Online Home Value Calculators?
The large real estate listing sites have their own formulas for determining property values. These values are broad, based on market conditions, and information entered by users on the site. They are almost always inaccurate, and don’t reflect YOUR homes value. But – but they provide a good starting point or a quick estimate. Think of it them as the “Kelly Blue Book” for cars. It is decent guess but since none of the sites share their forumla’s, take their values with a grain of salt. Studies show that many of these sites can be off by 20% or more! The site that has been most recently graded as “more accurate” is Redfin.
What it Means For You As A Seller:
Do your homework! Make sure you have all the numbers listed above and understand terms such as the equalization ratio and fair market value. Make sure you are working with a true professional who can help you to accurately determine the market value of your home.
Setting a great asking price is critical. You do not want to set it too high and have to repeatedly lower it to get buyers in the door. Your pricing history is public information, and repeatedly lowering your price can make buyers think there is something wrong with it. And for obvious reasons, you don’t want to set your asking price too low. To get the price you want you must exercise patience and make sure you are working with a true professional in Philadelphia.