What does the tax assessed value have to do with the actual value of a property?

I am looking to invest in real estate. This would be my first ever purchase of a property for such reason. I have been told to always look at the assessed value of a property before buying to see if the property is priced well or not. How does this value compare to the actual value of a property? As I've been doing research, I've noticed the majority of the properties are priced way above their assessed value. Does that automatically mean they are overpriced? Or is it that the assessed value is a certain percentage of the actual value of a property? Anybody that would be willing to share their wisdom of real estate investing, please do!!!What does the tax assessed value have to do with the actual value of a property?
In some markets the assessed value might be equal to or lower than actual market value. In most markets it is under by 17% to 35%. What can be gleaned from a look at the assessments of the entire block of a home your interested in is how it rates among the rest. All assessments will be off but almost evenly down the street. The assessor doesn't see the interior conditions or remodel upgrades. Some older people might have had their taxes abated or assessment frozen. This is why Zillow is so inacurate as often when recent sales info is sketchy it uses assessment as value. The old rule of thumb investor wise was never pay more than 65 cents on the market value, hence buy for assessment value. That dynamic has changed somewhat but keep in mind a never changing rule. Never pay more than what 1% of the price will bring in as monthly rent. A 100K house that cannot rent for 1K per month will lose you money. Some experienced investors can make such a property work but a beginner will lose money guaranteed. I have done this for decades and learned from some of the best.What does the tax assessed value have to do with the actual value of a property?
DON'T EVER LOOK AT THE ASSESSED VALUE AS AN INDICATION OF MARKET VLAUE.





Three reasons:


1. County assessors assess the properties at different lengths. Thus, for a specific property, you could be looking at an appraised value that was determined 3-5 or more years ago.





2. Assessors are increasingly using statistical models that may do a very good job for some properties, but be rediculously off the mark for others.





3. The assessed value is nothing more than an estimate of market value net of exeptions (percentage, dollar, or both).





So obviously, the assessed value has almost nothing to do with what a willing buyer would pay for the property in an open, arm's length transaction.
the tax asessed value is almost always lower than the real value or asking price of the seller of a home. It actually works better for you as a buyer, if the tax asessed value is lower then you will pay less in annual taxes on the home when you buy it, the real value or selling price of the home is something you need to go over with your agent, she should be able to go over comparables for the area, what has sold in the last 3 months, what is on the market now, what is currently in escrow within a square mile,





this type of data will give you a good read on the value of a home in that neighborhood with similar features and similar square footage, and price is always in the eye of the beholder, if you feel it is worth a certain price then that is what you would be willing ot offer and pay, doesnt really matter what is going on with other homes in the market





and if you do not make an offer at that price, that does not mean someone else will not make an offer on that property at that price
Tax Assessed value of a property is not a good measure so throw this out the window.





When a property is purchased (changes hands to a new owner) the new Tax assessed value becomes the Purchase Price paid by the new owner. Taxes will now be assessed on this NEW value for your property taxes. Now this value will be Re-Assessed every few years depending on the county and will be increased by a certain percentage. This percentage will increase the tax assessed value and your property taxes will accordingly increase as well.





This is not a good indicator because sometimes this increase can be as low as 10% every 5 years. Now if someone purchased this property in 1990 lets say, for 100k and been living there for 17 years the Assessed property value could be only 130k.





As for the MARKET value, this property could not be worth 500k or more in California but if you only looked at the Tax assessed value you would think its WAY overpriced.





This is why there is a MARKET Value to a home. Use comparable sales in the area, research your market and have a state certified appraiser make the analysis as to what the home you are looking to buy is worth. The Tax assesed value is just that. The Tax assessed value.





Let me know if you have any other questions or concerns.
Let me start off by saying that I'm by no means an expert.





If I understand it right, the tax assessed value is mainly an appraisal for tax purposes. It also might be what a mortgage company might be willing to finance a property for (depending on the company). A portion of this value is what your properties will be taxed on.





Market value may be higher than this value, depending upon the local market.





Again, I am not an expert, but I was just reading up on a little bit of it today.
The method for assessing property value is different in every state. Generally, the local tax authority will estimate property value and then allow exemptions against that value to compute the assessed property value. Here in Texas, you get a reduction for homestead, being over 65, being disabled, or be a war vet. Some authorities don't revalue properties each year. That said, market value will generally be more than assessed value. The best idea for you would be to make an appt. with your local tax assessor and get them to explain the process they use. The bottom line is the assessed value is only an indication of value, not the market value. It will rarely be accurate, but may allow you to compare 2 properties and see which is more or less valuable. Hope this helps.
Every County and State can differ on assessed versus actual value. Our county gives a value and then does a 2.5% roll back on that value to determine a millage tax rate. There are parts of Ohio where the tax assessed value is actual higher than the appraised value. One home I sent an appraiser to look over was worth less than they paid for it 2 years ago. A lot of factors can play into the current value of a property. Comparable property sales hold a pretty big impact on property value (once you try and pull out distressed sales, divorce, REO's etc). Make sure the area you want to buy an investment property has a good chance of success. If a multi-unit, check out the local occupancy ratios. What's the neighborhood like? Does the property have adequate lease agreements in place?
Assessed Value is set by the City/County Tax Assessor in order to calculate taxes due on the property. Many cities/towns use different methods for estimating assessed value, and properties are re-assessed at different intervals. Assessed value gives you a rough (extremely rough) basis to compare the property to others in the area with similar features/size.





For most of the projects I was involved in, I ignored assessed value and focused on recent sales data as a better indicator of value.





Also, keep in mind that in many cases, its in a municipality's best interest to over inflate the value of its tax base to enhance its bond rating.