I am looking for my first deal and I have come across a few properties of interest. However, when I do a property search on the tax assessors website, many times the Fair Market Value listed by the county is much lower than the properties list price?
My questions is, should I be using to Fair Market Value of the tax assessor as a starting point when making an offer? I'm curious to know how others determine the fair market value of a property.
Tax assessor values are traditionally low, and irrelevant.
For us it’s the neighborhood average to base tax collection on. Little to nothing to do with value. HOWEVER, if you wish to use it for negotiation...
I would just caution it can also work against you. If I’m the seller and I’ve seen the last five years the property fmv rise consistently then I’m going to “speculate “ and set my price higher for top dollar as opposed to a quick sale.
@Wayne Brooks Thanks for the information. So, how do you calculate the FMV or come up with an offer price on potential deals?
@Jorge De Jesus That's a good point, that I didn't think about. Thanks so much.
I agree with @Wayne Brooks on this one. "Fair market value" doesn't necessarily mean "What the house is worth."
When looking for a deal, generally, work backwards.
On a flip, take your After repair value and subtract your rehab costs, minute the percentage you'd like to make on the deal. That should leave you with an idea of where to start in your negotiations.
On a rental, find what the property would rent for per month, multiply it by 12 (annual Income) and then subtract taxes, insurance, holding costs, (whatever else you account for) and divide by your offer price to get your net ROI. Play around with the numbers until you find a starting price to go off of.
Hope this helps!
I would completely ignore the tax value. It has no relationship to the actual market value of a property.
To figure out your true market value you need to look at the most similar and nearest comparable sales. Zillow, realtor.com, and your agent's MLS portal will all show you recently sold houses.
Make adjustments based on size, condition, age, and any other important factors. It's the same thing the appraiser at the bank will do. Just try to think about what you would be able to realistically sell the same house for.
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