Dave,
We have been looking at homes, but have noticed that many of the homes we are interested in have a tax assessor value that is a good bit lower than the listed for sale price. Is the tax assessor value what the property is worth or what does it mean exactly? I'm thinking about making an offer on a property, but now I'm not sure I should make an offer if it is worth so much less than what they are asking for it. We just don’t want to pay more than it is worth.
Janet,
Grand Junction
Janet,
Another great question, and one we have to deal with on a regular basis, especially after new tax evaluations hit your mailbox! Let’s first look at how the assessed value is determined. I went to the Mesa County Assessors website (http: //assessor.mesacounty.us) and found the criteria for how the value is established and Colorado law is very specific on how values can be established:
1. Real property must be revalued every odd numbered year.
2. The actual value of real property is based on its value as of the appraisal date, which is
June 30th of the year prior to the reappraisal year.
3. Residential property may be valued using only the market approach to value. In this
approach, the value of the subject property is based on an analysis of comparable sales
to predict the price properties would have sold for on the Appraisal date.
4. The actual value assigned to residential properties is based on sales that occurred in the eighteen-month period from January 1, 2017 to June 30, 2018. Those sales indicate the market conditions in various parts of Mesa County, and the market value of specific types of properties. Note, five years of sales activity are analyzed for those types of properties that are few in number or of an unusual nature.
As you can see from the criteria above, my main take away is that values are established using sales from primarily sales that occurred from January 2017 thru June 30, 2018. We are in the middle of an eight-year run of property value increases so you can expect property values in the summer of 2020 being higher than the property values used to establish the tax valuation you may have just received in the mail. I believe it is also fairly safe to assume that property values will continue to move in an upward swing over the next few years, as I am bullish on our local economy and people from outside our area have a high desire to move to the western slope. Also note, #3 above indicates that these past sales are used to “predict” prices and when you predict, you are less likely to be completely accurate. Overall, the property tax valuation is a little like throwing darts…..not blindly throwing darts or throwing them in the dark, but safe to assume that more tax valuations will miss the bullseye than will hit it. Please don’t take offense with my analogy if you are a professional dart thrower….. simply trying to hit the mark! (no pun intended) I just googled professional dart throwers and there is such a thing…. I’m talking to you Michael van Gerwen!
Getting back on track, I regularly tell our customers that the assessed value of a property is more about tax revenue than about actual property valuation. The County Assessor has a herculean task of trying to establish values that are even “reasonably close” and frankly that office does an amazing job given the enormity of the endeavor. In 2011 when the housing market was in free fall and assessed values were predicted using sales from the peak years of 2008 and 2009 we saw assessed values that were significantly higher than market value and we had just the opposite problem and the complaints were rolling in daily. Right now you can be thankful that the value is based on actual values from at least 18 months ago.
I hope all this makes sense because it is my recommendation to never use the assessed value to establish a market price for a home or any piece of property. I rarely look at a property’s assessed value for any reason other than to accurately report the taxes due each year. Stop paying attention to the assessed value as it relates to today’s market value as one has nothing to do with the other. We are thankfully on the upswing and whenever market values are moving upward our assessed values are likely to be lower because they are established using older sales. Happy house buying! : )
Dave Kimbrough
The Kimbrough Team
