Published on October 26th, 2022
The Difference between Property Value and Assessed Value
Aventine Properties | 2 min read
An assessed value is a number that is given to a property in order to determine its true property value. You might see this on a tax bill or a property appraisal. It’s a unitless value that is treated more like a point system. There’s no real limit to it, unlike other point systems, which is why it tends to always go up. The more improvements a property goes through, the higher its assessment will be.
We’ve seen mansions with a 200K assessment in Suffolk paying the same tax bill as a 60K assessment in Nassau. How do you ask? Because there’s this special number called the Residential Assessment Ratio, which helps balance the amount of taxes every house has to pay. The RAR is the same for every property in said county. The assessment value divided by the RAR is what gives the true property value or the Implied Fair Market Value (IFMV). The IFMV multiplied by the tax rate is what equals your total tax bill. We will keep repeating these formulas constantly.
Now you might be asking why they use assessed values and RARs when they can just evaluate homes every year? Well, they are trying to save taxpayer dollars for more important things like snow removals and trash collection. This way they do not have to send an assessor out to the streets to reevaluate all homes because who knows how long that will take. Plus, human error is more likely that way. We’ve seen assessors claim that a property has a pool when in fact there is no pool and it was confused with a neighboring property. Of course, some small villages still decide to evaluate properties every year and we call these villages “re-assessing districts”.
Because of the recent inflation, the federal reserve has increased its interest rates to try and control the inflation rate. Mortgage rates are tied to the federal reserve rates which have sky rocketed to 7%! The higher the mortgage rates are, the lower the sale prices drop and low sale prices means better comparables to fight your unfair assessment. You can get started filing a tax grievance for next year’s tax bill on our website today.