Tax Assessment Versus Sales Price/Appraisal
I am considering buying a home. I looked at the tax assessment and it is a lot lower than the sales price.
The assessment is NOT the appraised value. An appraisal will look specifically at one property and compare it to other VERY similar properties within a relatively SMALL geographic area ( a few blocks to a couple miles) that have sold very RECENTLY (last six months or so). The assessment is used for tax purposes and is more of a birds eye view of a property that looks for somewhat similar properties in a wider area that have sold somewhat recently and is sometimes significantly different from the value assigned by an appraiser (and could be higher or lower).
The tax assessment could be similar to the sales price or could be VERY different.
In Maryland, properties are assessed once every three years and the assigned value for tax purposes will step up over the next three years to the value assigned by the assessor.
For example, a property was assessed for $393,000 as of 1/1/2015 and was previously assessed for $319,000. Each year the assigned assessment will increase by 1/3 of the difference for tax purposes. In Maryland, if a property is primary residence and a homestead tax application has been completed the increase in tax due is capped each year. For a primary residence with the homestead exemption, the percentage the property tax can go up each year varies by county.
Once the property sells to a new owner, the full assessed amount is used for property tax purposes.
Here’s info on Maryland assessments:
A real estate agent will run a comparative market analysis and tell you what properties that are similar to yours have sold for recently which should be reflective of what your property will appraise for, and therefore is a better estimate of sales price.
If you are considering purchasing a home in Maryland and want to be sure you are mortgage ready, my brother Tony and I will be happy to help! We help to make the mortgage process a pleasure!
If you already own your home, we are happy to provide a no-cost mortgage review to help you to determine if refinancing may be in your best interest. Please contact me at 410-960-2061.