In the course of conversations with both buyers and sellers, the terms “assessed value” and “appraised value” often come up. And they are often mis-understood. In very basic terms, the assessed value of a home is found on your Hawaii Tax Record. The County of Hawaii determines the home, condo or vacant land value and you pay taxes based on that value. That value can change annually. Appraised value is a horse of a different color. This is determined by an appraiser who is either sent out by the buyer’s lender, or is hired by a seller, to come to the property to determine the current market value.
The assessed value of a property is many times often less, sometimes considerably less, than the appraised value. This makes total sense because a homeowner wants to pay the least possible in taxes, right? When determining what to list a home for, or what to pay for a home, the appraised value is most important. If an appraisal comes in lower that the buyer’s intended loan, purchase price minus all cash down, one of four things must happen: The seller reduces the purchase price, the buyer and seller split the difference and the price is reduced accordingly, the buyer comes up with more cash for a deposit, or the contract is cancelled. (Yikes…we don’t want that!)
In a strong seller’s market, like the RE market in Hawaii the past 3 years, appraisals haven’t been a huge issue. But in a strong buyer’s market, where the inventory is high and the number of qualified buyers is low, knowing the appraised value of a property prior to going into contract can be very important. A seller certainly wouldn’t want their escrow to fall out because they had priced their home too high. And in a strong buyer’s market, sellers must be very conscience of pricing just to get a qualified buyer! The Big Island of Hawaii is still a very strong seller’s market. Low inventory and way too many buyers!
Is it time to list your Hawaii home?
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