Aloha, this is George Krischke with Honolulu HI 5 (now called Hawaii Living).
We often get asked what is the difference between tax assessed value, appraised value, and the true real market value of a property.
We’ll take a look. On October 1st once a year the tax assessor establishes the tax assessed value based on comparably sales during the prior 12 months. So the tax assessed values lag behind the real market by more than a year, sometimes up to two years actually.
Now there are some shortcomings with the tax assessed value. The tax assessor actually never gets to see the inside of the property, he doesn’t differentiate between if the property is in original condition, or has been nicely upgraded. The tax assessor doesn’t adjust for gorgeous ocean views, tropical level yard, or steep slope terrain, or property frontage on the street, or on the ocean.
So in Hawaii, a property that is on the ocean with 100 feet of ocean frontage that is a certain size with a certain lot size may get the same assessed tax value as a similar house that is two houses away, but not on the ocean, and sitting on a busy highway. So you can see the tax assessed value is far from accurate as far as establishing a good value for the property, or the real value for the property.
Now let’s talk about appraised value. The appraised value is a professional value opinion completed for a fee by a license appraiser. And those written appraisals often get ordered by a bank, or anybody that needs a professional value opinion.
A licensed appraiser determines the appraised value by researching, and comparing most recent, means the last three months maybe, comparable sales, and the appraiser does take in consideration the layout of the house, the condition of the house, upgrades to the house, and several other factors that the tax assessor will not take in consideration.
So there is quite a lot of research that goes into a professional appraisal, and there are different, criteria that come into play.
Now it is still just a value opinion. So if you order 10 different appraisals from 10 different appraisers there still may be differences in how the appraised values come in at.
So what is then the real market value? What is my property really worth? Well, the true definition is it’s worth what a willing, and able buyer is willing, and able to pay in today’s market. And the key is today’s market, because the market is fluid, and it can change.
For example, if you have a neighborhood with five homes available, and three sales recently, you can establish that, and one buyer looking for the property you have a certain real market value, and it could be totally different in three weeks time period just because three of the five homes went into escrow, and now we have two buyers looking at the same property.
So when you have two buyers looking at the same property it could happen that the property actually sells at a higher price than otherwise.
So the true market value can fluctuate over time, and sometimes in a short amount of time. But it is the value that a willing, and able buyer is willing, and able to pay in today’s market. Hope that explains it. Thanks for watching ~Aloha.