One of the most important factors when dealing with California real estate is understanding the property’s value. If you’re wondering what the differences are between the different measures of value for your property, you can check out the following definitions:
The appraised value of your home represents the home’s fair market value, or what a buyer might expect to pay if you listed your house for sale on the market. An appraised value is assigned to a property by a professional real estate appraiser.
The appraisal value is calculated by comparing your property with other comparable properties in the neighborhood that are similar in square footage, number of bedrooms, age, and overall condition. Appraised value is often looked at on a price-per-square-foot basis. This is determined by taking the appraised value and dividing by the square footage to find the price-per-square-foot. For example, a 2,500-square-foot house that sold for $400,000 is $160.00 per square foot.
Market value is the price that a property demands in a competitive and open market under all conditions requisite to a fair sale. However, there are several nuances that affect a home’s fair market value that you’ll have to look at.
The two most obvious ones are the location and size of the home. You can arrive at a probable market value by comparing similar properties in the same neighborhood.
The market value of a property is ultimately decided by buyers, who value real estate holdings based on what they think the price of a property should be and, most importantly, what they are willing to pay for it.
While market value refers to the price of your home in relation to the current market, the assessed value refers to the estimation of your home’s value that’s used to assess property taxes. Essentially, property taxes increase as the assessed value increases. Although there are some exceptions, a property’s assessed value typically is equal to its purchase price adjusted upward each year by 2%.
California’s Proposition 13 caps the growth of a property’s assessed value at no more than 2% a year unless the market value of a property falls lower. When that happens, Proposition 8 allows the property to be temporarily reassessed at the lower value. However, as the value of the property rises, the assessed value and resulting property taxes may increase more than 2% per year up to the annually adjusted cap.
If you have any questions regarding these different property values, please give us a call at (760) 930-0569 and one of our loan officers will assist you.