"Frozen in Amber" Homes

What Does Tax Assessed Value
Say About Market Value?

In a Buyer's market like today's, more and more listings announce that the home is "selling for less than tax assessed value" -- sometimes substantially less. The inference is that the home is a bargain.

Is it?

Not necessarily.

One situation where tax assessed value can be well above fair market value is when the Seller has been in the home for decades.

While their neighbors have been steadily updating and renovating over the years, the long-time homeowner has stood pat. So, thirty years later, the kitchen, mechanicals, and decor are all quite dated.

Even worse, the floor plan and amenities may be obsolete. The upstairs may only have one, hallway bath; if the home has hot water heat, switching from window a/c units to central air may be prohibitively expensive; and the one-car garage that was fine 30 (or 70) years ago just doesn't cut it.

Unfortunately, to the tax assessors most of these lagging characteristics seem to be invisible. They assume that the housing stock in a given area is relatively consistent, and as the neighboring homes change hands at ever-rising prices, the tax assessed value of the "frozen in amber" home rises, too.

Over time, the gap between the tax assessed value and fair market value of such a home can become increasingly wide.

I've personally seen instances recently where the tax assessed value was more than 20% too high. And that was for homes that weren't foreclosures or short sales!