How much above the appraised value is a fair price? (appraisal, agent)

[censusdata]

Hello, I'm several years away from buying a home and want some pointers.

After looking at a real estate listing I usually look the property's value up on my county's PVA site. I've noticed that nearly every listing is asking for 25% above what the vlue listed on the PVA site is. (example: looking at a house right now that is valued at 91k, listing is for 119)

Is this common? Also, I've never owned a home before. Since I'll be buying from an owner who is probably trying to avoid losing money since they bought the home before the real estate bubble burst is it hopeless from me to buy a house for what it's current value is?

[Tanya Donaghy]

Do you mean assessed value?

Taxing authorities will assign an assessed value to a property, which may only change every 4 to 8 years. That value is based on the current market value of the property at the time that the reassessment is completed. An appraisal is based on current market conditions and is completed whenever a property owner or buyer determines that it needs to be done.

Unless you really want a particular property for some reason or other, I wouldn't suggest that you pay anything above an appraised value. As for an assessed value, I would only take that into consideration for property tax purposes and not place much value on it to determine an appropriate purchase price.

[bbronston]

I don't know about your area but in my area the county appraised value is almost never the same as actual market value. Also, the valuations are always as of the 1st of the year and if you are looking at the 2010 taxes, you are looking at a theoretical value as of January 1st, 2010, not 2011. Again, that's my area.
When the time comes, work with an agent who will do research for you and let you know what comparable properties have been selling for over the past six months or so. That will give you an idea of what "your" property should sell for, give or take anything special or bad that "your" house has going for it.

[Lacerta]

Yes, assessed value is only a guess. It is usually based only on prior years' values, and at most, a drive by the exterior every few years. In my area, they are updated about April or May every year, but they very often have details wrong about the house (doesn't account for remodeling, or damage, or sometimes bases value off a 4 bedroom house, when it is actually only 3), so can be far off on value.

Appraised value is completely different. An appraiser actually comes in the house, looks at condition, layout, etc, and looks at market trends for comparable houses through actual sold prices. Determining a "fair price" is the point of an appraisal.

So to answer the question you actually asked, 0% over the appraised value is a fair price.

To answer the question you meant to ask, there is no way to determine what % over or under assessed value is fair price, as it really has no true bearing on actual value.

[manderly6]

You may need to multiply the assessed value by a rate to get something close to a market value. But even then I would not consider that an appraisal.

[MrRational]

Originally Posted by censusdata

Hello, I'm several years away from buying a home and want some pointers.

Find your state or county sale records (most are online now).
Look for the SPECIFIC history of this and a few nearby similar homes.

Find the "market" prices from about 1998 but no later than 2003...
Keep copies of these (5-10) records you find and hold those numbers in the front of your mind.

When you come back to the market in 3 years dig out those files...
and at THAT time see what the net changes in market values are relative to 1998 which is the last time prices made any sort of sense.

All else is conjecture.

[censusdata]

Thanks to all, this helps a lot. Like I said I'm at least 2 years away from buying a house but I want to get my ducks in a row now so I know what to do when the time comes.

FYI the value of the home I spoke of was from the PVA website.

[rjrcm]

Originally Posted by censusdata

...FYI the value of the home I spoke of was from the PVA website.

PVA = Property Value Administrator in Kentucky. According to the website, they re-appraise once a year in January. As indicated, not a good indicator of current market value unless you happen to be buying within a 3 month window or so of the new appraisal cycle. And then, it depends on how thorough they are as compared to a typical professional home appraisal.

[Lacerta]

I don't know, I saw this:

Your assessment is often based on what comparable homes are selling for in your neighborhood. Especially in Jefferson County, this can sometimes appreciate faster than expected. Also, remember that your property is usually only revalued once every four years. Therefore, the increase is actually reflecting four years worth of appreciation.

on the FAQ, which indicates that they only typically revise the values every 4 years. That seems strange to me. Maybe they revise the values based on trending markets every year, but only pull comps every 4 years, or something.

[rjrcm]

Originally Posted by Lacerta

I don't know, I saw this:

on the FAQ, which indicates that they only typically revise the values every 4 years. That seems strange to me. Maybe they revise the values based on trending markets every year, but only pull comps every 4 years, or something.

OK, thanks. Missed that. I was just going by the "About" page:

Fair market value is defined as the price a piece of property will bring in a fair voluntary sale between a willing seller and a willing buyer. The assessment date for the valuation of all property is January 1 of each year.

If it's every 4 years as in the FAQ, then all bets are off unless you happen to hit that 4th year.