How is the "Assessed Value" calculated

Question

I have bought some properties above assessed value and some below. Assessed Value and market value don't seem to be parrallel. Can someone explain the difference?

I mostly interested in multi family buildings. A lender brought it up to me that the assessed value is low compared to the agreed purchase price and she wasn't sure it would appraise. Going by cap rate and the area's gross income multiplier, my deal is great...

Matt Motil · Answer

Each municipality will have a multiplier that is used to determine assessed value from market value. When the property is evaluated for tax purposes it is then multiplied against this factor to get the assessed value. The property taxes are then a certain millage against the assessed value.

For example, here in the Cleveland area in Cuyahoga County the assessed value is 35% of market. So a property valued at 100k will have an assessed value of 35k for tax purposes. If you live in a city in the county that has a tax millage rate of 60 mills, then you would multiple 35 x 60 = 2100 to get your annual taxes.

If you buy in below this value (100k) then you have an opportunity to have the taxes re-evaluated. If you buy in higher, you should expect to have your taxes increase within the next calendar year.

Hope that helps

Eric Hathway · Answer

Very helpful, thank you both.

Russell Brazil · Answer

Every jurisdiction will have their own formula for assessing the value of property. Some may actually be market value of the property.....some may have almost no correlation to the market value. Even within the same jurisdiction, one assessor may be doing it different than other assessors.