Assessed value vs. Listing price

[Taseen Ranginwala]

Hi I'm a newbie and would like to educate myself. I've been looking through MLS listing and see that the listed price/asking price is much much higher than Assesed value of a property. Is there a correlation or should it be a correlation in between these two?

I would really appreciate if someone can educate me.

[Ronald Allen Barney]

To further clarify terms: price is the amount asked by the seller. Assessed value is set by the County Tax Assessor for determining what the owner will pay in taxes (and a tax assessment often uses variables not used in determining marketable value of a property). APPRAISED value is determined by a mortgage lender's appraiser and will form the basis of how much the lender will be willing to lend a buyer to buy the property. The delta between price (asking or negotiated) and the lender's LTV (the V in this case being appraised value), the buyer will have to pay in cash. For investment purchases the classic scenario is "20% down" due to an LTV of 80% but if a bidding war drives the price up to $20k higher than appraised value, the 20% down is now 20% plus $20k cash requirement in addition to closing costs. That's why I warn sellers that setting too high a price, even if people would normally be willing to pay that much, would be screening out all but the most cash-rich of buyers and thus limit the potential to make an actual sale.