How Much Over the Property Tax Value Can I Set My Asking Price to Sell My Home?

Your tax assessment and your asking price aren't really on speaking terms. The tax assessor uses the same basic information to measure your home's value as you do, but the end results are often sharply different. If you use assessed value as your starting point, you could end up asking too little, or overpricing yourself out of the market.

In some areas, the basis of property-tax assessments is the same as the basis for determining fair market value: The assessor looks for homes like yours that sold recently, and uses the average sale price to set your home's value. The property-tax value is different from the actual value, though. In Denver, for instance, assessed value is 29 percent of market value: If your house is worth $100,000, the value for property taxes is $29,000. In other areas, such as California, property-tax assessment values begin with your purchase price, and typically increase about 2 percent annually, regardless of the actual value of your home.

If your county sets your home's taxable value at 50 percent of the market value, that doesn't mean multiplying by two will give you a good asking price. Colorado, for example, only schedules assessments every two years; a two-year-old or even one-year-old assessment is not a good guide to the current market. Other states schedule assessments less frequently, or the assessments are up to the municipality. In New Jersey, for example, there are towns that have not conducted property tax assessments in decades.

Fair market value is defined as the price someone would pay for your house if neither of you is desperate, both of you want to close the deal and you're both reasonably informed about the current housing market. Determining the fair market value involves studying recent sale data from several comparable homes. Then you adjust for differences -- perhaps one house has a swimming pool and the other doesn't -- and you take the average of these adjusted prices. Unlike an assessment, the sale data should always be fairly recent.

Fair market value is a better guide to asking price than assessed value. The National Association of Realtors recommends that once you get a good FMV, you set the asking price 1 to 3 percent higher. This gives you room to negotiate without going below your home's market value, but it doesn't overprice your home to the point you scare buyers away. If you have to sell the house quickly, you may want to adjust your price down to speed things along.