Just Value vs Market value

[Clara Derry]

Hey squad. I am fresh to real estate investing and am learning more about determining reasonable offer prices and market value.  I thought that searching the just values for properties would help with market value since it says "just (market) value." Well, when looking up the just values from 2020, I am noticing large discrepancies from the list price (ex- list 195k, just value 95k).  Could someone offer insight/direct me to resources that could help me understand this discrepancy? 

[Joe Splitrock]

@Clara Derry I have generally seen the term value used several different ways. Let me break them down:

Asking Price (List Price): This is also called list price. It is what a property will be listed on the MLS for. This is not necessarily the eventual sales price or even market price. In a given market properties sell on average at a certain percentage of asking price. For example 3% less or 5% more. Asking price is a starting point. Sometimes a seller will price above market, but other times the price is below market price, with the intent of bidding the price higher.

Market Value (Just Value): This is the expected price that a buyer would pay. This is not a precise number, because market price is always changing based on recent sales and demand. If a person wants to pay below market value, it means you are getting it for less than you would expect it to sell when advertised on the open market.

ARV (After Rehab Value): This is the expected value of a property after it has gone through the rehab process. You may purchase a property for $100K and invest $20K into rehab with an expected ARV or $180K. This is a number used by flippers to estimate eventual sales value. It is also used by investors to determine eventual value for financing reasons.

Tax Value (Assessed Value): This is assessed value of the property for tax purposes. In most parts of the country the tax value is much lower than the market value. This is done intentionally by cities and counties and limits home owners disputing values. Usually within a given market you find tax value is a specific percent of market value. For example, something like 70%. It is not precise, but there is an average.

As far as why you are seeing a difference between just value and market value, it could have to do with how properties are appraised in Florida. The assessor adjusts the value each time it is sold. You could have an existing property that has an old value based on the old owner. When the new owner buys at a higher price, they will adjust the assessed value to match market (just) value. If the new value is double, your taxes will go up accordingly. Your offer price should be based on current market value, not an old value from previous tax assessment.