I’ve been asked lately, “What’s the difference between ‘Assessed Value’ and ‘Fair Market Value’ of a home? Shouldn’t they be the same? Why is the assessed value so much lower than the asking price of a home?”
To help clarify, the assessed value and fair market value is a monetary evaluation of a property. One is used by the local government and the other is used by the consumer and mortgage lenders.
Assessed Value
The assessed value of a property is a figure local governments use to determine a homeowner’s annual property tax. An assessed value is the state’s educated guess as to what the home is worth. These values are usually constructed months before the release of the tax bill for the property. The value is also fixed and the market could move in either direction showing no change in what the property is worth.
Fair Market Value
The fair market value of a home is based on what the property would sell for on an open market. The fair market value is determined by size, condition of the home, supply and demand, location, recent market history, comps in the area, etc. Mortgage lenders look to appraisers to determine the fair market value of a home.
Assessed value and fair market value will usually not be exactly the same on a property. The fair market value takes a snapshot in time and will be impacted by the market activity.
Do You Still Have Questions About the Housing Market in Hawaii?
Feel free to contact me, I would love to help answer any questions you may have.
Until next time, live with Aloha!
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