Quote:
Originally Posted by songkrai
One neighbor down the road purchased a lakefront home for around $980,000 this year. Did nothing to property. Straight purchase.
His new assessment is $1.3 million or thereabouts.
Same year. No changes.
How does that work?
Isn't the sale price the value of the house?
Doesn't this affect the value of all other lake homes on street - of similiar vintage and size? All have roughly the save assessment.
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So, you're assuming that government processes follow a logical pattern?
Ideally, assessment and sales price are closely matched. But in reality there are always a number of gating factors, especially as the property price increases. I think we're still seeing a lot of people hit by the economy, and making decisions that are based on necessity and immediacy.
Let's take an extreme example... Someone wins $100MM in the lottery. They put almost all of it into building the biggest compound on the lake. Let's even pretend that they buy every house on Welch Island, knock 'em all down and build a 30,000sf luxury abode. This property get's assessed at $75MM. Now, like many lottery winners with no financial sense, they realize that they spent pretty much all the money and don't even have the income to pay the taxes on the 75 million dollar property, much less actually use it. So, they are forced to sell. While the lakes region is a great area, it's not the kind of area (IMO) that's going to support what would be one of the most expensive residences in the entire US. Much less in a location that offers only seasonal access (though theoretically there is a helipad, if you own and can afford a helicopter). Anyway, the lottery people are forced to sell the house, but nobody is bidding more than $15MM for it. It's not that it's only *worth* $15MM from a raw component cost, just that there is a very limited selection of qualified buyers, and nobody wants it for anything more than $15MM. So, the property assessed at $75MM sells for $15MM, because the sellers were not very financially savvy and were forced into making a transaction where time was of the essence and they couldn't hold out for maximum price.
Variants of this scenario happen all the time. I'm not a realtor, but my experience is that the properties that are making up probably 80% of the market by volume (so, in the Lakes Region, probably the $100K-$300K properties right now) are going to sell for +/- 10% of their assessed price. As you move to the really cheap or really expensive properties you'll see more of a disparity between assessed price and sales price.