Real Deal REInvestor Network

One of the biggest myths in Real Estate, at least in Massachusetts, is that the assessed value and present market value on a property are the same.

Looking at assessed values is no better then using Zillow.com to figure out what a home is worth!

When the assessed value from the town is higher than the property present market value you will often see advertisings that says something like this: “Come see this bargain home that is priced $80,000 less than the assessed value”. What this tells me is that this person either does not know anything about property valuation or they think there will be someone that will believe the home really is a steal. Someone that knows better is going to be thinking the property has been over assessed by the town and the seller has been paying too much taxes!

Of course on the other hand you will see home buyers who see a home listed higher than the assessed value and will improperly use this as part of their negotiations when making an offer. If more people were better informed they would know that assessed values are a worthless piece of information when evaluating what a property is worth.

Most people realize that market values of homes in many parts of Massachusetts and all over the country have dropped over the last few years. As values were dropping many people believed their taxes would also be coming down too. People automatically came to this conclusion by misunderstanding that assessed values and fair market values were the same.

The assessed value of a property often falls behind the market because the valuations are not re-calculated until the beginning of the next calender year. So if the market values of homes are dropping it is not unusual to see the assessed value being higher. As well as if values are going up it could be just the opposite.

In summary an assessed value is the valuation placed on a property by a public tax assessor for purposes of taxation. Fair Market Value is the highest price which the property will bring when it is for sale on the open market to a buyer who is purchasing with full knowledge of the properties highest and best use.

1) How do I know whether I'm dealing with a legitimate person in the industry?

First of all, you should ask whoever your working with for references so you can see what people who know them say about them.  You should also be able to talk to these references on the phone.

2) How do I know I'm getting a good deal?

First you want to define what a good deal is to you.  This is subjective, but you probably want to make a minimum ROI of 10 points on the money your investing.  Second, the price that your paying should be less than the FMV or the Fair Market Value.  You should also be paying less than the ARV or After Repair Value.

3) How much under value should I be paying?

You should be paying 65 to 85 cents on the dollar for these properties so that you have built in equity going into the investment property from the start.