How to Assess a Home Before Buying How to Assess a Home Before Buying
Before purchasing a home, it's important to understand how property taxes and the home's assessment will play a part in the payments of the home. Property taxes are a significant expense for homeowners and should be understood in order to accurately calculate a property tax bill. Property taxes are based on the assessed value of the property, which, in some areas, is the same as the market value. Before you buy a home, it may be necessary to calculate what your property tax bill will be annually in order to manage your budget. An added benefit to calculating the market value is it will also give you a good idea of what you should be paying for the home.
Step 1 - What Are the Home's Features?
The first thing you’ll need to do is compile a list of all your home’s features. These features should include the total square footage of the home, the number of bedrooms, the year the house was built, the roof type and any additional amenities. These amenities would include the number and size of garages, block walls, any landscaping around the house, tile type within the home, counters and swimming pools.
Step 2 - Locate a Comparable Property
Because the market value of the home is based on comparable properties sold in the area, you’ll need to do a little research to find properties that are similar to the one you hope to buy. With that in mind, you’ll need to identify comparable properties that have sold in your area in the last six months. If the home is located within a housing track that contains similarly built houses, then simply locate any comparable properties from that neighborhood with a matching floor plan and find out the price they closed on. If there aren’t any comparable homes in the immediate area, then locate matching homes within a half mile radius and keep expanding your search until you find comparable properties. Keep in mind that these comparable homes should be similar in style, square footage (within 200 square feet), and age to the home you are interested in purchasing. Don’t worry about additional amenities until the next step.
Step 3 - Find Your Home's Value Range
After you’ve successfully compiled a list, narrow your search of comparable homes to the best three to five that most closely resemble your property. The price range of these homes can then be used to indicate the value range of your property. If the comparable properties contain additional amenities that are not included in your property, such as swimming pools, fenced yards, granite counters, etc. then you’ll need to make adjustments to compensate. To do this, you’ll need to subtract the amount for the additional amenities from the comparable property’s sale price, and vice versa if the situation is opposite and your property has the added amenities. For instance, if the comparable property features granite counters in the kitchen and your property doesn’t, then you’ll need to subtract a dollar amount for the granite counters from the comparable property.
Step 4 - Find the Average of Adjusted Sale Prices
Now it’s time for some simple math. Add together the entire adjusted sale prices of the comparable properties. Then, divide the total of the adjusted sale prices by the number of comparable properties. This final number, which is simply an average of all the adjusted sale prices of the comparable properties, is the estimated market value of your home. Use this number as a guide when calculating property taxes on the home and when considering a final price for the home. Keep in mind that some places take the market value and multiple it by an assessment rate to determine the final assessed value. Typically, the assessment value is calculated annually, but in certain areas it is done every other year. Also, if you ever disagree with your property tax bill, then you will need to check with your local tax authority to find out how to formally request a reassessment. With property taxes being such an important aspect of paying for your home, finding out the assessment value of your home is something that will help you understand what you’re paying for and, more importantly, how much it will influence your budget.