Value field when assessing property tax records: Is this reliable???

Question

Okay guys, your newest wholesaler has another question:

I am currently researching some the the vacant properties around my area and I keep writing down this note about the "value" of the house. What is this?

Is this the actual ARV, or is this just some number drummed up by an appraiser at the time of their actual appraisal?

Is this useful to me in any way? I'm seeing houses being sold and bought above and below this number, so what is this "value" field on the paperwork telling me?

Thank you so much in advanced! You guys are such a big help!

Jeff Copeland · Answer

In my county (Pinellas Co, FL), the property appraiser lists a "Taxable Value" (used to calculate property taxes and not really correlated to anything meaningful as an investor), as well as a "Sales Comparison" value.

The latter is the property appraiser's (the database, not him/her personally) attempt at comps. It's a very rough number (as are all mass appraisals), but I actually find it very useful as a screening tool.

Why? How?

Because through experience, and by comparing it to actual sales, I've found it's consistently 25-30% below retail/ARV. Looking at that number on the property card, plus the "Zesimate" on the Big Z (which sometimes has even more variability) can give me a pretty good ballpark range of ARV in about 2 minutes, from my cell phone.

If those two numbers are way too low to make the deal work, then that's all I need to see. I scratch it and move on to the next one. But if the deal looks good at a glance using these two numbers, then I move forward and look at actual comps in the MLS to get a clearer picture.

Anyway - I assume the "Value" field you're referring to is something similar, and I suggest you try to use it to your advantage by figuring out how accurate it is and how much variability it typically has.

Hope that helps!

Josh Caldwell · Answer

@darrin Carey is correct, if you are looking at taxable value, that has no relation to ARV and in many cases no relationship to reality.

Back to your question about the spread between price A and price B question, there is no hard and fast rule here.  Early on, you will be content to make little chunks of cash, that more seasoned investors wouldnt bother with. As you do more deals then your standards will rise.  Most or many investors buy the house and then look to sell it.  I dont do it that way.  I dont close on a property till I have a buyer in hand.  That way I cant screw up.   I like the safety of the way that I do things

I hope that helps

Josh

Darrin Carey · Answer

@Shannon Webb

It'd be much easier to help you if we could see what you're looking at. PM me if you don't want it on the public forum.I always question anyone elses given "value" for a property, especially on many of the lists being emailed around. Always determine your own property value "As-is" and "After Repaired".The standard formula is ARV times 70% - Repairs = MAO.MAO is the most you can sell it to a rehabber for. subtract your wholesale fee from the MAO and that is what you can offer the seller. I'm in a low priced market, so 5-10k is pretty common.

Darrin Carey · Answer

@Shannon Webb

The "value" field is likely the Tax Assessed value. The Tax Assessed Value has no relationship to the current or future market value of the property.The Tax Assessed Value is only used to calculate property taxes.

Shannon Webb · Answer

@Jeff Copeland

that is exactly what i am talking about! Thank you so much!

Ned Carey · Answer

Where are you seeing this value field? That is the most important question.

My guess is you are looking at tax records.  Value is probably the number they came up with when doing the tax assessment. Assessed value is the amount they actually pay taxes on. These can be different based on homeowner credits etc.

As already said any number regarding tax assessed value is not likely helpful. However actual sales prices from the tax records are helpful.

If the number comes from a site like Zillow then it is just as useless.

Shannon Webb · Answer

Thank you guys!!! Means a lot!

Shannon Webb · Answer

@Josh Caldwell

thank you for responding! It seems like to me, and from many investors on my list that price B has to be significantly higher than price A to be a deal? Is this always the case. Even when a house is close to move in ready?

Shannon Webb · Answer

@Darrin Carey

thank you for replying! There is both a taxed "assessed value" field as well as a "value" field.... I'm asking if the value field is closely related to, or if it directly corresponds to the ARV?

Josh Caldwell · Answer

The value of a house is what the market price is at this moment.  ARV is an educated guess about what that value will be after you do X repairs.

Let me make wholesaling a lot more simple for you.  If you are going to wholesale a house, you can buy it for price A and sell it for price B as long as B is greater than A you have a decent property.

To protect yourself, use an option contract, so that if you screw up your valuation (and you will) then you dont lose you hard earned cash. With an option, you have the option to just walk away if nobody will pay you more than you are buying the property for.

I hope that helps

Josh

PS make sure your option contract is legal for your state before you do this.

Value field when assessing property tax records: Is this reliable???

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