Assessment? Appraisal? Opinion of Value? If you have ever tried to determine what a property is “worth”, you’ve heard these terms. What‘s the difference? Which is the best determinant of really what a piece of property is worth right now?
An “assessment” is a value placed on a property by its town for tax purposes.
An “appraisal” is a value reached by a professional who is trained and licensed usually for a financial institution as a basis for a loan, or for an estate.
An “opinion of value” is a selling (or buying) price derived by a real estate professional derived using current market real estate sales and comparable properties offered for sale in that market.
Appraisals and Opinions of Value are pretty straight forward, are in the current time frame, and their mechanics are easy to understand. But how does the the town “assess” your property, and why does it keep changing? How does the town “Assessed Value “ affect the taxes you pay?
The state of New Hampshire has a law (RSA 75:8a) that requires that all towns reassess themselves every five years. They don’t have a choice. Because New Hampshire relies so heavily on local property taxes to fund town governments, the state sees it as its duty to see this done accurately, and to reflect “market value” at the time of the assessment. If your town waits five years to do this, your assessment is very apt to change dramatically. My town (Meredith) chooses to reassess 20% (100% divided by 5 years) of the town each year, rather than a total reassessment every five. So if you are in that reassessed 20%, your assessment may change. If not, you wait and see. My point here is that the real estate market, like any other, is not static. So the current “assessment” of your property is not guaranteed to be spot on as to the market and is not always a dependable benchmark for current pricing. An appraisal or an Opinion of Value should be more reflective of the market as it is right now.
So, how are your taxes computed and what is the relationship of your appraisal?
Towns do this backwards. They add up all the budgeted expenses to run the town the next year (town tax (local government, roads, etc.), local education tax, (local schools) state education tax, and county tax (sheriff, county home, etc.), and divide this into the total assessment of all properties in the town. This gives them a tax rate per thousand that will fund the expenses. So if all expenses remain the same but the assessed value goes down (as it has recently), the tax rate goes up (as it did in Meredith this year-12.51 in 2013 to 14.41 in 2014).
If you are wondering who the winners are in the race for the lowest town tax rate, small towns with a lot of expensive taxable property and/or a low year round population come out on top. Hart’s Location tops (or bottoms) the list with a tax rate of 4.58, Newcastle is next at 6.39, Hebron at 8.05, and a local favorite Moultonboro comes in at 8.69.
Try to buy a house in Newcastle for less than a million bucks!
Kim Cedarstrom is a licensed residential and commercial Realtor(R) and consultant and president of Great Northern Real Estate and Business Advisors, an affiliate of Roche Realty Group offering a lakefront/residential real estate practice as well as commercial property and business sales services. Kim can be reached at firstname.lastname@example.org or directly at 603-520-6609