A lot of people use the county’s tax assessments as shortcuts when valuing real estate. In this video we discuss the three major things that you must remember when using this approach!
Transcript:
Hi there! Casey Denman here from TaxSaleAcademy.com. In this video, we’re talking about using tax assessments for your real estate valuations. Now valuing real estate is obviously one of the most important aspects of real estate and tax sale investing. If you don’t know what a property is worth, you don’t know how much you should pay for it, you don’t know how much you should sell it for, you don’t know if you’re going to make money or lose money. So obviously, you have to understand real estate valuation.
So it brings up to a very important question – should you use the county tax assessment as a value for your real estate? It’s very, very easy to obtain this figure oftentimes. You can just log on to a website, and then boom, it’s right there. You don’t have to really think about it. But should you use this figure to go off of for investing your hard-earned money in a piece of property?
Well, you have to realize three things about the tax assessment. Number one is that different states use different valuation methods. Now, a certain state for instance might use a 50% valuation method. What this means is that if a piece of property has a true and fair market value of $150,000, the tax assessment on that property might only be $75,000. So when you pull up the records online, it’s going to say the property is assessed at $75,000. So right then, you have a huge discrepancy between the assessment and the fair and the true market value.
Other states, it might be 70%. Other states, it might be the full market value is the actual tax assessment. So the first thing you have to do is understand how it works. Do a little bit of research before you start relying or looking at those numbers and understand, is that number a percentage of the fair market value or is it the full and fair market value?
The second thing you have to realize is that tax assessments are often many years old. In certain parts of the country where we have very, very tight budget constraints, they just don’t have the budget to afford the manpower or to afford the assessors to go out there and look at the properties. So you might have one assessment that might be three or four years behind. I’ve seen tax assessments before that are 8, 9, 10 years behind. And believe me when I tell you, a piece of property was valued a lot higher 10 years ago than it is today. So if you go off a tax assessment that was valued from 10 years ago and you try to sell it for that amount of money today, you’re probably going to be in a very, very losing battle.
The third thing you have to realize is that tax assessments can be inaccurate. Not always, but they can be inaccurate. I’ve seen properties before where the tax assessment had them listed at – it was a one-bedroom, one-bathroom – when in fact, they were a five-bedroom, four-bathroom. Obviously, it was a huge mistake on the assessor’s part.
But something you have to realize here is that these assessors a lot of times are going as fast as they possibly can. They aren’t appraisers. They’re not somebody you’re paying $300 to $500 to spend an hour at your property and give you a very precise figure. These are tax assessors. They might spend four or five minutes, check a few things off, say, “Yep, yep, yep,” and move on to the next property. So mistakes do happen and they can be inaccurate.
So again, the three things you have to realize as far as using tax assessments for valuing real estate is that different states use different valuation methods, tax assessments can often be many, many, many years old and they can be very inaccurate. They can give you a ballpark figure, I suppose, and maybe a starting point, but don’t base your whole investment around the tax assessment. You are much better off using a proven valuation strategy such as a comparable sales analysis, which you’ll see discussed in a later video.
I hope you’ve enjoyed this video about how to use tax assessments in your tax sale investing business. For more information on the very lucrative tax sale investing business, head on over to my website at TaxSaleAcademy.com, which you could do by clicking the blue link right here next to my head. Again, it will take you to the TaxSaleAcademy.com. And once you get there, download your free copy of my e-book, The Tax Sale Investing Blueprint, and you’ll be on your way to a very successful tax sale investing career.
Take care, folks! Bye-bye.