Junk data hurts buyers by creating distraction from understanding market value. Buyers need to know market value in order to negotiate for a fair price. Assessed value is not the way to figure fair market value.

But, but, but…how can a property be worth more than what the town or city assesses it for? Don’t the town or city assessors know what they are doing?

Why do towns create assessed values for every property?

Every town or city has a tax rate for residential property. They also have a rate for commercial property, which is often different.

Real property (land and buildings) in the town or city are valuated; that’s your assessment. Owners pay that tax rate, multiplied by the assessed value of their property.

How are assessed values created for all the properties in town?

Every two years, most cities and towns reassess the real property in town. They can’t possibly look inside all the houses and buildings, but assessors go out to a sampling of them, then extrapolate. The town total for real estate value is figured. Then, a rate that covers the municipal budget is set.

  • Assessed values are based on a sampling of properties. They can be significantly wrong, especially in areas like ours where properties are about a hundred years old and vary widely in regard to condition.
  • Assessed values of renovated properties do not fully account for improvements made just before the sale. (This is especially true of renovated/flipped places.)
  • Assessed values lag behind the increasing values when a real estate market is rising. A lot can change in our markets in a two-year period.
  • Assessed values tend to be conservative (low) to discourage property owners from filing for an abatement. An abatement is a reduction of assessed value and the associated property tax.

Repeat after me: “Assessed value has no relationship to market price.”

Your taxes and the towns you choose

The tax rate for residential property varies a lot. In 2024, the rate for Somerville was $10.19 per 1000 of value. Meanwhile, the rate was $5.92 per 1000 in  neighboringCambridge. So, in Somerville, the annual tax on a $1M house is $10,190; it’s $5,920 in Cambridge.

When the tax rates are so varied, you can understand why the assessments may be much lower in towns that have a higher rate, and vice versa. Towns that have a higher rate can assess property value lower and still meet their budget. Towns with a lower rate have to assess property value higher to end up with the same tax income.

When you hire an exclusive buyer’s agent from 4 Buyers Real Estate, your agent will do a market study to identify a fair market value before you decide on an offer negotiation strategy. Your lender will do an appraisal.

Both of these calculations are a better indicator of the market value of the house or condo you intend to buy.