During a listing presentation, agent David tells his seller client in Jefferson City, Missouri: 'Your home's assessed value on the county tax records is $57,000. That means the county thinks your home is worth $57,000.' The seller's home is a single-family residence. Which of the following best explains why David's statement is misleading?
Correct Answer
C) David should have explained that Missouri assesses residential property at 19% of market value, so an assessed value of $57,000 implies a market value of approximately $300,000.
In Missouri, residential property is assessed at 19% of its true (market) value. Therefore, assessed value does NOT equal market value. To find the implied market value from an assessed value, the calculation is: Market Value = Assessed Value ÷ Assessment Ratio. $57,000 ÷ 0.19 = $300,000. David's statement incorrectly equates assessed value with market value, which would dramatically understate the home's worth to the seller. The correct explanation is that the $57,000 assessed value implies a market value of approximately $300,000.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
Depreciation is an accounting method of allocating the cost of an asset over its useful life, allowing investors to deduct a portion of the asset's cost each year.
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- → Three depreciation:
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