How Is a Property Value Determined?
It’s a total of the land worth plus any improvements made to the land. Those improvements can be anything from your house – the most obvious – to sheds, fancy driveways, tennis courts, pools, even landscaping.
As for the land, its size and location and its ability to be developed are determining factors. If it’s too hilly or sandy, making it difficult to build on, it likely will be worth less. If it’s in a desirable neighborhood, it’s going to be worth more. If it’s near shopping, that can be good. If it’s too close to shopping centers and traffic, that can lower the value.
Keep in mind, too, future zoning plans. A home may have a higher value when it’s first built and has wonderful green-space views. But if zoning allows for that green-space to turn into a shopping mall 10 years down the road, you can expect the home’s value to decrease when the view changes to delivery trucks and parking lots.
All the components that make up a property’s value are given values based on comparable properties in the neighborhood. For instance, if you live in a strictly middle class neighborhood and add a tennis court – the only one in your whole neighborhood – an assessor (or current buyers) may not really see it as a valuable addition – at least not valuable enough to pay a premium for the home – since most people moving into a strictly middle-class neighborhood would neither expect nor want a tennis court in their yard.
How Is a Home's Market Value Determined?
What are you willing to pay? That’s often the market value. But in reality, the market value is what your house is worth on the open market - what are people paying for homes similar to yours.
If somebody grossly overpays for a property, that doesn’t mean that sales price is its real market value – not if similar homes in the neighborhood are not selling at the same price. Likewise, you may get a real steal on a house, but an assessor may not see it your way – he’ll say that other people are paying $20,000 more, for instance, for the same type of house in your neighborhood – so your taxes are going to be based on the real market value, not what you paid.
To decide what to pay for a home (or what to sell yours for) it helps to look at comps – the recent selling prices of nearby homes that are of a similar size, age and condition. Be sure to look for homes very near to yours, not similar homes in different neighborhoods. Everything in the area – from proximity to shopping, quality of schools, crime rate and general neighborhood upkeep – figure into the market value of any given home.