Horry County mailed property tax bills a couple of weeks ago, and Keller Williams The Trembley Group Real Estate Professionals’ phones are ringing with their client’s questions about their Horry County tax bills. Fortunately, Palmetto State residents enjoy the fifth-lowest property taxes in the United States. In 2018, the average property tax rate in South Carolina was only 0.57%.
Specific rates vary by county, but overall, almost everyone saves money on taxes when they make a move to South Carolina. The excellent news is that Myrtle Beach and Horry County residents enjoy the lowest real estate property tax rates in all of South Carolina. The average effective property tax rate in Horry County is just 0.37%. At that rate, taxes on a home with a full market value of $200,000 would be only $740 per year!
Property taxes in South Carolina are collected by individual counties. Each county has its own means of assessing and collecting monies due. The Property Tax Calculator is a useful and valuable resource for folks looking to buy and budget for Myrtle Beach real estate.
Many real property sellers and buyers have gotten confused, trying to sort out a property’s actual value. Typically, real property is valued according to the local real estate market’s sales, an appraisal by a mortgage lender, or its value as assessed by the local tax assessor. The assessed value of the property determines property taxes. And the appraised value is an appraiser’s opinion of property value, which is used by a mortgage lender for determining the maximum loan they’re willing to make. It is probably very similar to its fair market value, what a buyer and seller agree a home is worth in the open market with fully informed buyers and sellers. And then there’s a property’s asking price or listing price which should approximate its market value, its appraised value, and in a perfect world, its assessed value.
How Do Assessed Value and Fair Market Value Differ?
Anyone who thinks real estate assessed value and real estate fair market value have any correlation is wrong!
According to Eric Graham, Keller Williams The Trembley Group Real Estate Professional, “during the last few years, while working as a Myrtle Beach Realtor, I routinely come across people who have the misconception that there is definite correlation between their home’s assessed value, and it’s fair market value. I always try to set the record straight. In most cases, there is very little correlation between the two figures.”
Some of the folks who most misuse this information are Realtors themselves! Of course, a Realtor who is going to discuss a home’s fair market value in relation to its assessed value is only going to do so if it sheds a positive light on the property they are marketing or trying to list. Unfortunately, some Realtors themselves perpetuate the myth of assessed Real Estate values having a strong correlation to their present market value.
At Keller Williams The Trembley Group, the professional Realtors try to educate their clients and the general public about the big difference between the assessed value and fair market value.
In most cases, assessed values are nearly worthless when calculating real estate market values.
Here in South Carolina, most people realize that over the years, real estate values will go up or down depending on the local market. As values rise or fall, some people believe their taxes should go up or down in correlation with the value. People arrive at this conclusion because they misunderstand the relationship between assessed value and fair market value,
In theory and in an ideal world, the assessed value and the market value should be the same. Unfortunately, this is rarely the case. Assessed values are nothing more than a yardstick Horry County uses to fairly collect enough taxes to pay for the services they provide.
Valuations are not re-calculated until the beginning of each calendar year, so homeowners need to remember that the assessed value of their home usually lags the market. So, if the market value of local property is declining, it is not unusual to see the assessed value being higher. Likewise, if values are heading up, it could be just the opposite, and assessed values are lower than the market.
To arrive at a value for tax purposes, the assessor looks at the recent sales prices of similar properties, the value of any recent improvements, any income the property is generating from renting out a room in the property, or leasing a garage. Plus, they look at other factors like the replacement cost of the property in the event it was destroyed by fire.
The assessor ultimately arrives at an assessed value of the home and deducts any tax exemptions for which the home or the homeowner qualifies. The higher a home’s assessed value, the more taxes the homeowner pays.
How to Challenge An Assessed Real Estate Value
Not often, but sometimes a homeowner will purchase a property, and when they receive their first tax bill, they’ll think the assessed value is out of line as compared to the fair market value. It happens more often than most homeowners think.
When a homeowner thinks the assessed value of their home is out of line with similar homes in their neighborhood, they can visit their local assessor’s office and file for a tax abatement! All the information necessary regarding the application process and the deadlines for filing are readily available in the tax assessor’s office in the Horry County Courthouse in Conway.
In Horry County, appeals for tax abatements on 2019 taxes are due on or before January 15, 2020. The form for appealing the tax assessment can be found on the Horry County Tax Assessors Office on-line.
What is Fair Market Real Estate Value?
So, what’s the difference between real estate assessed value and its fair market value?
The fair market value of a piece of real estate is whatever a ready, willing, and able buyer is willing to pay for a property in an open market with no undue influence.
Realtors often use the term “arms-length transaction” when discussing value. An example of a transaction that is not arms-length would be some sales between family members – when the title is transferred (as a gift, perhaps) to a North Myrtle Beach vacation condo to a child by his parents. When one family member buys a property from another family member at a discount to what it would have sold for on the open market, the transaction it’s called a “bargain sale” and is not an arms-length transaction. Under these circumstances, there is no way a real estate appraiser can conclude that a property’s value is equal to the reduced sales price.
However, if that North Myrtle Beach condo was on the open market and every ready, willing, and able real estate buyer had an equal opportunity to purchase the condo, an appraiser would conclude the sale price was the fair market value regardless of whether the buyer and seller were related or not.
There are some additional situations in residential real estate when there are extenuating circumstances, and a property sale is not considered an arms-length transaction. The sales price is not considered the fair market value.
Sometimes a sale is court ordered during a divorce. And sometimes selling becomes constrained by time, and an owner may discount the sale price to get the home sold quicker – perhaps an owner’s job is being transferred across country or even overseas.
A distressed property will usually not sell for full fair market value. A distressed property sale could be due to an unusual number of foreclosures in a neighborhood, a toxic waste dump nearby, a property being in a flood zone, or other similar issues that could cause buyers to look for homes elsewhere. There are also examples of real estate being sold at a bargain price to avoid bankruptcy.
Homeowners should approach their home’s value in the same way a real estate appraiser would. The real estate’s fair market value is determined by looking at the sale of other similar properties in the area.
Typically the comparable sales should have occurred in the past six months to be considered. Lenders and appraisers will generally not consider sales for older than six months. The comparable homes should be on a similar lot and be of similar size, style, and characteristics.
Either a Keller Williams The Trembley Group Real Estate Professional or a competent real estate appraiser can determine a home’s real estate value. The operative word is competent. Evaluating the fair market value of real estate is a developed skill.
A professional certified appraiser conducts an appraisal. An appraisal is typically ordered by a lender, when the buyer in a real estate sale is applying for a mortgage. The home is the lender’s collateral for the loan, and the lender wants to be sure that the real estate collateralizing their investment has a value equal to or higher than the purchase price.
An appraiser also provides comparable market values for a property when homeowners apply for a new mortgage to refinance the existing mortgage on their home. Theoretically, the fair market value and appraised value should be similar. When appraisers and real estate agents determine market value, they both use comparable sales data to arrive at the definitive property value.
But in the end, the appraised value and the Realtor’s opinion of value are nothing more than opinions of value. They should be very similar because they are based on previous home sales data in the same neighborhood that any reasonable person would conclude is substantially identical. Frequently, the appraiser and the real estate professional use the same comparable sales to determine their opinions of value.
Setting an Asking Price or Listing Price
So, what does the assessed value, appraised value, and market value have to do with asking price? Not a whole lot.
When setting the asking price of real property, it’s essential to understand how it sells. A property’s assessed and appraised values will always give you two facets of its true value, of course. However, sellers relying strictly on a property’s assessed or appraised values may incorrectly price that property for the market. Generally, property asking prices reflect their market values, though it’s also hoped they won’t exceed appraised values, regardless of any tax values.
Regardless of a property’s assessed or market values, mortgage lenders won’t typically lend more than its appraised value. Also, up to 60 percent of all properties may feature excessive, outdated, or incorrect assessed values. Property appraisals are also used by many property owners to appeal their property assessments when they’re thought to be excessive or incorrect. Real estate brokers deliver market value opinions while appraisers and assessors use one of three different valuation formulas for their views. I have seen two homes built by the same builder side by side where home “A” was larger and had a bigger lot than home “B” yet home “B” was charged more in taxes due to a higher assessed value. This should never happen, but it does!
Homes that have re-sold more recently will usually have a more accurate correlation of their market value vs. assessed value than a house that has not sold in a long time.
For example, a home that sold a couple of years ago usually will have a stronger correlation than a house sold fifteen years ago.
Another example of how assessments can become slightly skewed is the homeowner who feels they are over-assessed by the town, files a challenge, and wins an abatement. The lower amount is now their assessed value.
Does every other homeowner who has a similar property get a notice in the mail saying their properties assessed value will also be coming down courtesy of the research done by Mr. Smith, who lives down the street?
Conclusions on Real Estate Assessed Value vs. Fair Market Value
In summary, the assessed value is a value placed on real estate by the Horry County tax assessor for taxation. Fair Market Value, on the other hand, is the agreed-upon price between a willing and informed buyer and seller under usual and ordinary circumstances. It is the highest price that the property will bring when exposed for sale on the open market to a buyer who is purchasing with full knowledge of the property’s highest and best use.
The list price is a seller’s advertised price or asking price for a home. It is a rough estimate of what the seller wants to complete a home sale. A seller can price high, low—which does not happen very often—or very close to what they hope to get. An excellent way to determine if the list price is a fair one is to ask a Keller Williams The Trembley Group Realtor for sales prices of similar homes that have recently sold in the neighborhood.
Differences Between Value
Understanding the differences between a property’s taxable value, either assessed or appraised, and its asking price is essential. For one, a property’s assessed or appraised value for taxes may be different than its market value. A property’s market value is what that property might sell for, regardless of what its assessed or appraised values are. For example, a property could have an assessed tax value of $200,000 but a market value of only $175,000. Conversely, owners may feel their $200,000 assessed home has a market value of $225,000 and set that as the asking price.
Assessments and Appraisals
Property assessed values are determined by assessors working for local governments and are used to calculate property taxes. Property appraised values are arrived at by certified appraisers using various industry valuation formulas. Homeowners frequently seek appraised values before selling their homes and nearly always by mortgage lenders and estate planners. Assessors have their methods that may or may not match the formulas used by appraisers. Some governments may rely on appraised values to set property taxes.
Setting Asking Prices
When setting the asking price of real property, it’s crucial to understand how it sells. A property’s assessed and appraised values will always give you two facets of its true value, of course. However, sellers relying strictly on a property’s assessed or appraised values may incorrectly price that property for the market. Generally, property asking prices reflect their market values, though it’s also hoped they won’t exceed appraised values, regardless of any tax values. The best way to set an asking price is by consulting with a Keller Williams The Trembley Group Real Estate Profesional.
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At Keller Williams The Trembley Group, we pride ourselves on being the experts at more than just selling real estate. We are local residents, some of us have been here for a lifetime. The rest of us will be here until the end of time. We love living, working, and playing in the diverse backyard of Coastal Carolina, and look forward to helping you live and love your dreams soon too. Please reach out to us by phone or email for personalized 6-star service and one-on-one advice.