Understanding Assessed Value: A Comprehensive Guide

When it comes to property ownership, understanding the various values assigned to your home is crucial. One such value is the assessed value, which plays a significant role in determining your property taxes. In this blog, we will delve into what assessed value means, how it is calculated, and how it differs from appraised and market values. If you have any mortgage service needs, feel free to call O1ne Mortgage at 213-732-3074. We are here to assist you!

What Does Assessed Value Mean?

The assessed value of a home is an estimate of its monetary worth as evaluated by professional assessors. This value is recorded on your municipal tax rolls and is used to calculate property taxes. Depending on your location, the assessment may be conducted by your county, city, or town. Regardless of the entity performing the assessment, your home typically has one official assessed value shared by all jurisdictions that charge property taxes. These jurisdictions can include school districts, libraries, and fire, water, or sewer districts.

How Is Assessed Value Calculated?

Assessments are calculated based on various property attributes that also factor into a home’s market value. These attributes include:

• Square footage of living space
• Number and types of rooms
• Size and location of the lot
• Amenities or special features such as extra garage bays, outbuildings, decks, or built-in pools
• Sales prices of similar properties sold nearby in recent months

Unlike appraisals, assessments are typically conducted without requiring a walkthrough of the house or surrounding property. Drive-by assessments are common, and assessed values may even be calculated using public records that document your home’s characteristics. However, if you’ve made significant renovations or suffered damage that could affect resale value, an assessor might schedule a site visit to better evaluate the changes to your home’s tax value.

Assessed Value vs. Appraised Value vs. Market Value

It’s essential to understand the differences between assessed value, appraised value, and market value:

• Assessed Value: This is the estimated value of a home used to calculate property taxes. It is determined by a professional property assessor and required by municipal tax authorities. The assessed value is typically updated every five years unless the home is expanded, renovated, or damaged.
• Appraised Value: This is an estimate of a home’s current market value, considering local market conditions. It is determined by a professional property appraiser and required by lenders issuing mortgages or loans collateralized by home equity. The appraised value is updated anytime the home is financed or used as collateral on a loan.
• Market Value: This is the amount a buyer is willing to pay for the property. It is determined by real estate professionals and homebuyers according to free market forces. The market value is updated anytime a home is sold.

How to Calculate Your Property Taxes Using Assessed Value

Many municipalities base taxes on a set percentage of your home’s assessed value, known as the “assessment ratio.” Property taxes are calculated by multiplying a home’s assessed value by the assessment ratio and then multiplying the result by the municipal mill rate. A mill is one-tenth of a cent, or 0.001 dollars; a mill rate of 1 means paying $1 for every $1,000 of your home’s taxable value.

To calculate your annual property tax bill for any given taxing jurisdiction, use the following formula:

Tax Bill = (Assessed Value × Assessment Ratio) × Mill Rate / 1,000

For example, in a town with a 70% assessment ratio and a mill rate of 32, the annual property tax on a home with an assessed value of $350,000 would be $7,840. The calculation looks like this:

($350,000 × 70%) × 32 / 1,000 = $7,840

Appealing Your Home’s Assessed Value

If you disagree with your home’s assessed value, you have the right to appeal the assessment. Typically, you must do so within a specified time window (such as 45 to 60 days) after receiving notice of a reassessment. Filing an appeal does not guarantee your assessment will be reduced, but it allows for a review of the valuation.

A Final Assessment

All 50 states have some form of property taxes, and a home’s assessed value plays a critical role in determining your annual tax obligation. Because lenders typically fold annual property taxes into your mortgage payments, your home’s assessed value, and its impact on your tax burden, will also affect your monthly mortgage payments.

If you’re considering a home purchase, it’s wise to investigate the property taxes to understand how they’ll affect your monthly budget. If you plan to finance a home, it’s also wise to check your FICO® Score ahead of submitting your mortgage application and, if appropriate, work to increase your credit score before seeking a mortgage to get the best lending terms you can.

For any mortgage service needs, don’t hesitate to call O1ne Mortgage at 213-732-3074. Our team of experts is ready to assist you in navigating the complexities of home financing and ensuring you get the best possible terms for your mortgage.