Whether you’re shopping for homes or wondering what the value of your home is, chances are you’ll see differing values associated with any given property. What you see listed on a Zillow “Zestimate”, Redfin Estimate, the asking price of a property for sale (via MLS) and the assessed value of a property are all different numbers - and sometimes they can be wildly different. So, what do you make of all of this seemingly conflicting information? Let’s break it down. 

What is Assessed Value?

The assessed value is the dollar value assigned to a home or other property for tax purposes. It takes into consideration comparable home sales, location, and other factors. In Massachusetts, state law requires that all property be assessed at its full market value as of January 1, before the start of the fiscal year, which begins on July 1st. 

The ownership, value and condition of property on January 1 determines an assessment and to whom the tax bill is assessed. New structures, additions, demolitions, improvements, or alterations that occur after January 1 will not be reflected in the assessing record until the following January 1st. Certain exempt property has a date of determination of July 1. 

According to the state of Massachusetts, assessors estimate what a typical buyer would reasonably pay for a property on January 1st of the year. Assessors do not consider updates inside the home, such as remodels, new electrical work, plumbing, or new flooring. Given that the Assessment Notice is mailed six months after the assessment, it quickly becomes outdated compared to actual market trends and we see bigger gaps or differences between assessed value and fair market value.  

If the assessed value doesn’t align with your expectations, there’s no need to panic. Assessments primarily serve tax purposes. For the purpose of transacting real estate, we tend to focus more on market value, recognizing that the true value of a home is subjective. Your real estate agent will be able to provide you with accurate market trends and comparable homes to accurately price a property to get it sold, or help you buy.  

If you want to dive deep into assessed values, you can read into the state’s Property Assessment and Valuation Guidance resources page.

Fair Market Value 

Fair market value in real estate refers to the price at which a property is likely to sell in an open market. Essentially this is the amount a buyer is willing to pay and a seller is willing to accept. Unlike assessed values, market value indicates what a property could realistically sell for. Determining a home's market value requires a detailed analysis, taking into account several factors:

• External Characteristics: curb appeal, roof condition, lot size, home style, parking and the like.
• Internal Characteristics: square footage, number of bedrooms and bathrooms, updates, appliances 
• Mechanicals: Age and condition of systems like HVAC, water heater, plumbing, and electrical systems.
• Comparables (Comps): Analyzing the recent sale prices of similar homes in the area is essential for an accurate market valuation.
• Supply and Demand: The balance between the number of buyers and sellers in the area affects the perceived value of the property.
• Location: Factors such as neighborhood desirability, school quality and nearby amenities play a significant role in determining market value.

Are Zillow “Zestimates” and Redfin Estimates able to accurately determine “Fair Market Value”?

A Zillow estimate, or “Zestimate”,  is a feature offered by Zillow.com. According to Zillow, it "uses a sophisticated neural network-based model that incorporates data from county and tax assessor records and direct feeds from hundreds of multiple listing services and brokerages” to calculate a Zestimate. Redfin offers a similar feature.

In theory, it’s an interesting idea, but there are several reasons why these numbers may not be as accurate as you’d like them to be.  Zestimates are only as accurate as the data behind them. So, if the number of a home's bedrooms or bathrooms, its square footage, or its lot size are inaccurate on Zillow, a Zestimate will be inaccurate. 

A Zestimate also takes into account actual property taxes paid, exceptions to tax assessments, and other publicly available property tax data. The tax assessor’s property values can be inaccurate, though. The tax assessor database also might have a mistake related to a property’s basic information, causing the assessed value to be too high or too low. 

Sometimes a homeowner makes improvements or upgrades to a property that should increase the value of the home. However, unless the local property tax authority has added that information to the public database and record, Zillow can't use it. Zillow can only update its listings when this information is made available.

Housing turnover also affects the algorithm. The more home sales that occur in your area, the more data Zillow has about how much buyers think those homes are worth, which in turn makes Zestimates more accurate. So, if you live in a hot real estate market, your Zestimate might be more accurate than if you live in a rural town where people stay in their homes for decades and sales are rare.

Curious about the market value of your home in today’s market?  We offer complimentary, in-person consultations to help you determine your home’s current market value and explain what you can expect during the selling process. We can assure you that our team is not here to pressure you into selling your home. Our consultations come with no strings attached - no obligations and no pressure.  We really love sharing our expertise and helping clients reach their real estate goals, whenever the time is right. Reach out to us to set up a consultation!