How to Price Land Using “Assessed Value”

Learn Everything about Land Buying and Selling at Land Academy
Learn Everything about Land Buying and Selling at Land Academy

Whether you are sending out a mailer and need to determine an offer price, or you have received a call from a seller and are trying to calculate the market value of their property, many individuals incorrectly turn to the “assessed value” as a starting point. Because this information is easy to obtain and comes from an official county department, many feel that the figure (dollar amount) is highly credible. But the fact is:

Using assessed value is NOT the way to value a property.

Assessed value is only a means of determining a value for tax purposes and can be disputed by property owners. Every property owner is mailed an annual notice from the county (usually a postcard) and the assessed value is listed as well as appeal instructions. Many factors are used by county assessors to reach their valuations, such as: sales comps, supply and demand, location (downtown or rural?), neighborhood trends, services, and more. With so many elements being considered it is easy to see why specific property estimates can be inaccurate. So the assessor gives the property owner the option to ask for a re-evaluation each year.

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Here are two examples of properties showing the vast differences between assessed value and market value:

Acres: 9.40 County Use: VACANT LAND (0000)

San Bernardino County, CA

Total Value: $3,731 Assessed Year: 2015 Property Tax: $46.73
Recording/Sale Date: 09/21/1984 /
Sale Price: $11,200 
Munic/Township: BARSTOW

 

After researching today’s comps from sites like LandWatch, LandandFarm, and Zillow, the average asking price for 10 acre parcels in Barstow, CA is between $10,000 and $15,000. The assessed value prices the property at $400 per acre. Yet, the market value starts at $1,000 per acre.

What a difference!

In the first example the assessed value and tax base is much lower than what the property’s market value reflects.

Here is another example of a Colorado parcel illustrating the other extreme:

Acres: 4.03 County Use: RESIDENTIAL LOTS (100)

Costilla County, CO

Total Value: $3,546 Assessed Year: 2014 Property Tax: $51.92

 

Today’s comps on the same sites value this property as a low as $2,500. That means the assessed value is $880 per acre yet market value is only $620 per acre.

When speaking with sellers I have a list of standard questions that I ask about their property. One question that is not on my list? “What is the assessed value?” Why? Because as I have shown, it does not matter. The true value has always been and still is – what buyers are willing to pay!

Another interesting item to note is that the examples used are unimproved, vacant land. The disparities found in improved lots (lots with a house or structure) are even more pronounced! And remember the crazy recession a few years back? Property values were all over the place!

The question of assessed value versus market value is a common one that I hear from our Land Academy community members as well as our LandStay wholesale buyers. Now that I have addressed why using assessed value does not work, the next logical question is “what is the best way to value a property?”

I guess you will have to read my next blog.

Cheers!

Jill