Q. Yvonne, I’m researching a house I would really like to buy. But the tax value is not any where near the sales price. Should I be concerned?
A. Looking at real estate tax value for an individual house is irrelevant because that is just a snapshot of value. As you know, the market value of a house always changes. For example here in Raleigh, NC, the tax assessor determined the tax value of our Wake County real estate in early 2008. Of course, our market value has changed greatly since then. So, an individual house’s tax value is rarely the actual market value.
Having said that, I can tell you that comparing tax values can be very useful. The tax value is very helpful to use to see trends in neighborhoods.
Some Raleigh or Cary, NC neighborhoods have significantly increased their market value compared to their tax value. Some are selling for 125% or more of their tax value (Average tax value $350,000. Average sales price $437,500). This is a good sign this neighborhood is still appreciating nicely compared to 2008.
Other neighborhoods are selling for around 100% of their tax value. (Average tax value $425,000. Average sales price $425,000). These neighborhoods have weathered the storm. Prices may have fallen over the course of the last few years, but the price is recovering and now holding steady.
Some neighborhoods, particularly ones in the upper end price point are seeing homes sell for 70% of tax value. (Average tax value $1,539,000 vs Average sale price $1,077,300). If you are looking for a home in this price point you are in luck! There are Raleigh and Cary communities that have beautiful million dollar homes at bargain prices.
So, Wake County, NC tax values can be useful in establishing the trend patterns for neighborhoods. But I would absolutely caution you about looking at individual home tax values. You don’t know if the owners appealed their tax value or if the home has had some major upgrades since 2008. Remember this tax value was simply a snapshot of the tax assessor’s appraisal in early 2008 (for Raleigh, NC real estate). Look at the snapshot from a “big picture” point of view and you can see how a neighborhood is doing – and find some bargains.