What is Real Home Value? And How Is it Calculated?

The biggest question home sellers usually have is: how much can we sell our house for? And rightfully so. But calculating your home value is not always as easy as one would think.

In order to come to the real value of your house, sellers need to first understand what type of value is being determined. With this information, you should be able to come to an accurate home value.

Home Value #1: Tax Assessed

Home sellers will have little input in influencing the tax assessed value of a home as this is done by the local government. This value is important in determining the amount of tax a homeowner will pay on their property.

Keep in mind that each local government establishes their own tax rate. And this rate is independent of what you originally paid for the house.

This is how the process works: a local accessor reviews what the purchase price of the house was. If any improvements were made by the current owners, this is factored in. At the same time, research on the local comparable homes are conducted.

With all of this information, a home value will be determined. This number will then be multiplied by an assessed ratio. From here, your tax will calculated.

For example, a house that is valued at $250,000 with an assessment rate of 80% produces a tax assessed home value of $200,000.

Home Value #2: Tax Appraised

The tax appraised value is the technical name for the number that the local government arrives at when assessing the property. This is the number that is then multiplied by the assessed ratio in order to determine your property taxes.

Home Value #3: Market Value

Sellers often associate “market value” with “what my house will sell for.” In the first two home value calculations, the outcomes are determined by the government’s assessment of your property. However, the market value is determined by the home buyers.

In other words, the market value of your home will tell sellers what potential buyers are willing to pay for your house. With that in mind, there is no set formula for calculating the market value of your house. But sellers can still use a number of tools to arrive at a home value.

One place for sellers to start is in researching the local comparable sales (or comps). This will provide insight into the current condition of the market. Sellers will be able to see what home prices are – and are not – selling at. And with this information, sellers will be able to determine what price range to enter the market with.

When preparing to sell your house, home sellers will always want to first understand the local market and its conditions. This will give you access to pricing opportunities that buyers will support.

And when you are buying a house, it will be important for you to understand both the market and tax assessed value. Having an estimate on your property taxes will be an important calculation when taken in consideration alongside the market value of the home.