Today I’m answering your question about how to assess property value, and the topics I’m going to cover are:
- There Is More Than One Type of Property Value
- Why I Invest in Tax Defaulted Property
- Counties Use the Tax Assessed Value at Auctions
- The County Receives Its Revenue From Property Taxes
- Clearing Up the Confusion on the Types of Property Values
- Tax Defaulted Property Investing Can Be Lucrative
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There Is More Than One Type of Property Value
If you want to create a conversation, just ask three different people for the value of real estate property.
One person will discuss the tax assessed value. Another one will be adamant about using the appraised value, and still others will want to use the comparable values (comps) in the area.
You’re not going to secure an immediate consensus of opinion on how to assess property value.
Why I Invest in Tax Defaulted Property
I’m Ted Thomas, and I’ve been involved in a subset of the traditional real estate business. For more than 30 years, my experience has been primarily in tax defaulted real estate which includes tax lien certificates.
The tax defaulted business from my perspective is buying properties at low bargain prices and then reselling them back into the market. These are bargains, but only if they can be purchased at prices below the existing market.
For example, the treasurer places a value on the property of $100,000, however, the starting bid at the tax auction is only $10,000. That’s 10 cents on the dollar. There are not many traditional real estate sales taking place at a starting bid of 10 cents on the dollar.
In this instance, the government starts the auction at 60%, 70%, or 80% or more below the tax assessed value.
Counties Use the Tax Assessed Value at Auctions
Tax defaulted auctions take place in over 3,000 counties across the United States, and values are always in question.
The tax assessed value is determined by the county. However, the treasurer may pick a price considerably lower after they’ve taken into account the location, size of the property, and the amount of bidders available.
The county treasurer uses the tax assessed value for that county and usually has a strategy of low starting prices because the county does not want the property. What the county wants is the revenue the property will produce.
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The County Receives Its Revenue From Property Taxes
The revenue from the tax defaulted auction will be used by the county to pay county employees, school teachers, firefighters, and police and to fund many other county responsibilities.
Tax defaulted real estate is important to the county government because the revenue is considerable and the county needs the money. In other words, property taxes are a major source of income to the local government.
Counties and municipalities have the authority and the mandate to tax within their jurisdictions. Note that this has nothing to do with new state and federal modifications to tax write offs for wealthy individuals.
There is no hidden agenda. The tax assessor releases the information on the tax assessed value of every property. That can change dramatically with market comps and whether the tax assessor assumes the property will generate income.
Clearing Up the Confusion on the Types of Property Values
Expect lots of confusion regarding various values. So what should you do? To know how to assess property value prior to buying, learn about the different values before you attend the auction.
Tax Assessed Value
The tax assessment is used for determining the amount of the property tax and is simply what the county assessor says prior to the tax delinquent property going to auction. That value will be revealed on the auction site, the county website, and in writing for an offline auction.
The appraised value could be substantially different from the tax assessed value. The appraised value is placed on the property for a given date and time only and is required by the banking community before they will grant a loan approval.
The market value can be determined by various comparables and knowing what properties are selling for in the community, whether the economy is good or bad and the person making the evaluation.
Tax Defaulted Property Investing Can Be Lucrative
The county’s objective is to collect back taxes and place the property onto an honorable tax roll where the property owners will pay taxes.
The treasurer will take into account all of these factors and still may start the auction at $100. However, that doesn’t mean that the property will sell for $100.
Savvy investors with training help the county government when they purchase. The property returns to the honorable tax roll, and well financed buyers make good deals when they purchase at bargain prices and sell at higher prices. However, in order to know if the property is a bargain, it’s important to understand how to assess property values.
We hope you enjoyed Ted’s lesson, “How to Assess Property Value”
There is a lot of confusion about how to assess property value when there is more than one type of value. The 3 main types are:
- Tax assessed value which the county uses to determine the property tax amount.
- Appraised value which is used by banks to determine property value before lending.
- Market value which is largely determined by the comparable values of properties in the neighborhood and the state of the economy.
The tax assessed value is the one that counties most frequently use at tax defaulted auctions while the market value is most often used by investors and property owners who are selling real estate.
If you’d like to know more about tax delinquent property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
Learn how to reap huge rewards from tax lien and tax deed investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.
Ted Thomas is not an attorney, a CPA or an appraiser.