Market Value vs. County Assessed Value

Posted by Marc Rasmussen on Tuesday, September 19th, 2017 at 7:30pm.

Sarasota Home Values

How do you estimate the value of a property?

What Market Value is NOT:

  • It is not the price you paid for the home plus improvements and real estate commissions.
  • It is not how much your friend, in-laws, attorney, accountant, sister with a real estate license, neighbor or anyone else thinks your house is worth unless they are willing to buy it at that price and you are willing to sell it at that price.
  • It is not what you paid for the home plus a needed or expected rate of appreciation. More specifically, the rate of appreciation you read in the newspaper, heard on TV, saw on Zillow or from some other source.
  • It is not more than what your neighbor’s house sold for because you simply like your house better.
  • It is not - perceived value - mortgage balance = amount needed for next home purchase.

I recommend you read Wikipedia's page on Real Estate Appraisal to give you a great understanding on how to estimate the value of real property today. In a nutshell there are three approaches to figuring out value - cost approach, sales comparison approach and income approach

One of the biggest frustration Realtors deal with are clients who think their property is worth more than someone is willing to pay for it. When you see all of the properties for sale that expired without selling it is typically because of asking price. This might be an interesting read about that topic - Was it Price?

Cost Approach

This method attempts to figure out market value by recreating the property. The theory is that the value of a property can be estimated by summing the land value and the depreciated value of any improvements (structure).

Let's say you found a fabulous Sarasota beach home on Casey Key for $4,000,000 that you are thinking of buying. However, you notice that the lot next door is for sale at $1,000,000. Both lots are virtually the same. You also consulted with some builders and received estimates of around $1,500,000 to recreate the existing home that you are thinking of buying.  All in all it would run you about $2,500,000 to recreate the same home but only newer. Does $4,000,000 sound a little pricey? It will to most.

Sales Comparison Approach

Most residential Realtors use the sales comparison approach to figure out the value of a home. You will often hear the word 'comps' or 'comparables' from your Realtor. This method is based on the principle of substitution. It assumes a knowledgeable buyer will pay no more for a property than it would cost to purchase a comparable substitute property.

For example, take a condo building like 888 in downtown Sarasota where the differences in condos are not typically substantial. All of the units face west with great water views, were built at the same time and have the same amenities. The only differences are the floors they are on, condition of the interior, floorplans and size. Assume there are three units in the building with the same floor plan for sale and are priced between $350,000 and $375,000. What are the chances a buyer is going to pick a different unit in the building priced at $500,000 if it is pretty much the same as the other three units? Unless the condition is dramatically different there is probably a very slim chance.

There are flaws with this method. Keep in mind that the sales approach takes into consideration recent sales. If prices are rising or falling quickly then sales that occurred 2 or 3 months ago can be outdated. Price adjustments need to made for when prices are on the move. For example, remember Sarasota real estate in 2005 when prices were shooting up? Homes were selling above recently sold similar homes. Remember in 2008 and 2009 when prices were falling quickly? Homes were selling below recently sold similar homes.

Income Approach

The income approach is not used much for residential Sarasota real estate. It is used in multi-family or commercial property appraisals. Income does play an important role in value when analyzing beach condos that is geared towards generating cash flow. With all else equal a Siesta Key condo that allows short term rentals will be more valuable than a condo that generates less rental income because of tighter rental restrictions.

Sarasota Market Value vs. County Assessed Just Market Value

A lot of people try to figure out a way of valuing property by looking at the Sarasota county tax assessed values. I have found that the relationship between what a property will sell for and what the county assesses the property for is too unreliable. I pulled 20 random sales that have occured in the last 30 days and compared the sales price with the county assessed value.

Address Sales Price County Just Market Value County Market Value/
Sales Price
825 Longboat Club Road $12,500,000 $6,197,700 50%
5109 Jungle Plum Road $3,200,000 $2,123,800 66%
1300 Ben Franklin #902 $2,875,000 $2,399,800 83%
2185 Gulf of Mexico Dr. #221 $1,400,000 $1,123,400 80%
800 N. Tamiami Trail #1801 $1,097,500 $926,800 84%
1800 Ben Franklin #909 $1,067,500 $1,196,800 112%
434 Meadow Lark Drive $950,000 $635,126 67%
646 Waterside Way $1,000,000 $708,000 71%
100 Central #G713 $725,000 $478,100 66%
508 S Polk Drive $695,000 $467,300 67%
1750 Ben Franklin Drive $515,700 $473,000 92%
37 Sunset Drive #71 $490,000 $549,400 112%
3721 Eagle Hammock Drive $442,000 $434,800 98%
1055 Peppertree Dr. #407 $297,200 $415,000 140%
1100 Imperial Dr. #406 $275,000 $212,400 77%
4702 Thomas Hoby Place $267,000 $168,200 63%
1393 Fraser Pine Blvd. $250,000 $241,100 96%
2708 Wisteria Place $245,000 $145,200 59%
1796 Cottonwood Trail $225,000 $273,700 122%

I divided the Sarasota county assessed just value by the price it sold for. Take a look at the percentages in the third column. They range from 50% up to 140%. Do you see any reliable correlation between the two numbers?

September 19th, 2017 Update

I originally wrote the article below about five years ago. It has received 15,761 views, so I thought it would be good to bring it back and update it a little bit. The methods of valuing property are still the same as they were 5 years ago. The only changes might be the online valuations from 3rd party websites like Zillow. These estimates can influence home owners, Realtors and buyers. You should read this article for more information on that subject - Zillow Inaccuracy - Part 1

I am curious to see if the relationship between market value and assessed values are still unreliable. So I decided to compare for 20 recent sales.

Sarasota Market Value vs. County Assessed Just Market Value - 2017

Address Sales Price County Market Value County Market Value/ 
Sales Price
7858 Sanderling Road $9,000,000 $5,057,400 56%
1808 Casey Key Road $6,550,000 $5,208,700 80%
55 Lighthouse Point Dr $4,500,000 $3,453,100 77%
888 Blvd. of the Arts #801 $1,170,000 $709,600 61%
5281 Cape Leyte Way $1,100,000 $883,200 80%
521 Bowsprit Lane $1,075,000 $831,200 77%
2564 Tom Morris Drive $875,000 $645,000 73%
3920 Elysian Woods Ln $820,000 $703,900 86%
5155 Flicker Field Cir $675,000 $526,300 78%
732 Eagle Point Dr $500,000 $267,500 54%
4698 Del Sol Blvd $490,000 $431,300 88%
3961 Spyglass Hill Rd. $450,000 $374,100 83%
5963 Midnight Pass Rd. #364 $440,000 $331,000 75%
800 N. Tamiami Tr.  $435,000 $341,700 76%
2024 Racimo Dr. $435,000 $342,200 79%
1990 Main Street #13 $388,000 $335,800 86%
2703 Datura St $276,000 $200,400 73%
6533 Waterford Cir $269,000 $190,300 70%
2435 Gulf Gate Dr. $261,000 $187,500 72%

Looking at the deviation between actual sales price and Sarasota county assessed value for the twenty sales above shows an average of 75%, with a low of 54% and a high of 88%. This is a small sample size but it does look a little more reliable than when I did this five years ago. 

Key Takeaway:

I still believe the best way to value real property is the sales comparison approach. In other words, find some good similar properties that have recently sold and start there. 

5 Responses to "Market Value vs. County Assessed Value"

Alex Krumm wrote: This is a great post ... I have this same conversation with my customers all the time. The county value estimate is just about as unreliable as it gets, but that's a tough pill to swallow for a lot of people.

Also, I like your post pic :) Posted on Monday, May 16th, 2011 at 7:45pm.
Marc Rasmussen wrote: Thanks Alex. I see way too many buyers thinking that the county assessed values are what they should be willing to pay for a property. Posted on Monday, May 16th, 2011 at 7:47pm.
John Sabia wrote: Marc, great post. I recently had this discussion with a client who couldn't understand a list price of $1.3 million and the county assessed price of 749k. Turns out the seller had owned the property for about 10 years with homestead, tore down the prior structure and built a new home within the past 1.5 years. Another buyer purchased the home for 1.1 million. There are many factors that contribute to the county assessment and I explained this calculation is a snap shot of the neighborhood based on past sales while an appraisal is a valuation of the specific property based on recent similar sales.. Posted on Monday, May 16th, 2011 at 8:07pm.
John M wrote: With such a broad discrepancy in the figures, does that mean there is a lot of inequity in taxation? Posted on Tuesday, May 17th, 2011 at 8:52am.
Marc Rasmussen wrote: Thanks John S. County assessed values need to be looked at to figure out property taxes not in determing market value.

John M - Thanks for the comment. That may be the case but I don't think you can make that conclusion just by looking at this information. Posted on Tuesday, May 17th, 2011 at 10:55am.

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