Assessment Ratio
Definition of "Assessment ratio"
When a real estate owner wants to know what their property tax liability is, they calculate the assessment ratio for their property. An assessment ration is a relationship between a real estate's assessed valuation and its market value. In order to know what is the assessment ratio for any personal property or real estate, a homeowner needs to learn what the assessed value of the property is and its market value. In order to discover a property’s assessment ratio, one needs to divide the assessed value of the property by the asking price of the property. The assessment ratio is rarely at 100%, as the two values rarely match. So let’s see how the assessment ratio works.
How does the assessment ratio work?
As mentioned above, the math to discover the property’s assessment ratio is relatively simple. Getting the two values can be slightly trickier.
Firstly, you need to know that the assessed value is a value that the authorities, in this case, a government assessor, sets for the property annually to calculate the annual property tax of the owner. In order to calculate the assessed value of a property, the assessor needs the property’s market value, which is multiplied by the assessment rate. The assessment rate is set at the district or county level.
The second element of the equation is the market value of the property. That is relatively straightforward as it is the actual price of the property if it were put on the market. For this, one needs to consider the supply and demand present on the market at that time, the structure of the real estate, materials used, aesthetics, etc.
The difference between a property’s market value and its assessed value gives homeowners a good understanding of the market’s current condition, discouraged or promising. If the two values are equal or close to being, then the market is promising; if the values are distant, the market is discouraged.
The formula for the assessment ratio is:
Market Value/Assessed Value = Assessment Ratio%
Popular Real Estate Terms
Individual who attempts to maximize his or her profitability by investing which the anticipation that a particular investment will go up in value. A speculator will generally be willing to ...
Large room at the entrance to a building designed for people to converse or move about freely. ...
The willingness of a lender to give a mortgage to a mortgagor. A mortgage commitment will give a time period the mortgage will be given and an indication of the interest rate to be charged ...
Also called "Grey Shell, "Bare Shell," and "Artic Shell," a Cold Shell could be described as the more radical version of a Vanilla Shell. So, what does precisely the Cold Shell definition ...
Written statements about a person or business that are malicious, unfounded, and damaging. It is the basis for legal action. ...
When we discuss loans, it is essential to know that there can be many types of loans and there also are open-end loans and closed-end loans. In regards to closed-end loans, these often work ...
Monthly fixed rental payment. ...
(1) Occupancy rate at which rental income of a property pays for operating expenses and debt service, leaving no residual cash flow. (2) The level of sales of a real estate business where ...
Selling price for a property less assumed mortgages by the buyer. For tax purposes, the computation of the contract price is critical. ...
Have a question or comment?
We're here to help.