Real Estate Word of the Day: Assessed Value
Assessed value is a valuation placed on a property by a public tax assessor for the purposes of taxation. Unlike market value, which is determined by what a buyer is willing to pay for a property on the open market, assessed value is used by local governments to calculate property taxes. Each municipality has its own methods and standards for determining the assessed value, which can involve various factors such as the property's size, location, and improvements, as well as broader market trends.
The process of calculating assessed value typically involves several steps:
- Property Inspection - Assessors often start with a physical inspection of the property. This includes measuring the property's dimensions, evaluating the quality of construction, and noting any special features or improvements.
- Comparative Analysis - Assessors compare the property with similar properties in the area. This comparative market analysis helps ensure that the assessed value aligns with local real estate conditions.
- Application of Formulas - Various formulas and tables are applied to adjust the base value of the property. These may take into account depreciation, the cost of replacing structures, and other economic factors.
- Adjustments for Local Factors - Local economic conditions, zoning laws, and the overall demand for property in the area can also influence the assessed value.
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