October 3, 2014
Hatteras Island Real Estate:
Assessed values vs. selling prices
By TOM HRANICKA
Dare County revalues properties for tax purposes, a question always
arises concerning how closely the newly assessed values reflect actual
selling prices. In this article, I would like to provide some insights
on this popular dialogue.
Before we begin, a few background comments might be helpful.
value is defined as the official appraised value of a property for ad
valorem tax (property tax) purposes. State law establishes
standards for real property taxation, assessments, and
appraisals. In North Carolina this legislation has the colorful
name of “The Machinery Act.”
To determine values for
taxation, the law requires that real property be reappraised at least
every eight years, but counties have the discretion to conduct the
revaluation more frequently. In Dare County, the most recent
reappraisal of property took place in 2013.
Real property is
assessed at 100 percent of the fair market value determined as of Jan.
1 – the effective date of the revaluation.
properties in the county have been reappraised, the value that has been
established generally remains unchanged until the next revaluation is
completed. Exceptions to this guideline might include the
correction of errors in the original appraisal, changes to land such as
subdivision or erosion, additions to existing houses, or the
construction of a new house on land that was unimproved at the time the
revaluation took place. In these cases, the appraisal would be
adjusted to reflect the change, and a new appraised value would be
While there are several definitions of fair market
value, the one that I personally like states that fair market value of
a property is the price upon which a fully informed buyer and seller
agree, assuming there are no undue influences (e.g., health issues,
financial considerations, etc.) on either party and assuming the
property has been exposed to the open market. In other words fair
market value is reflected in the selling price.
reviewed the 137 residential sales that took place on Hatteras Island
between January and the end of September. I then compared the selling
prices of the properties to their assessed values.
The following graphic summarize the results of that analysis. Distressed properties include short sales and foreclosures.
the relationship between selling prices and assessed values was studied
by price range, some interesting observations emerged. One trend was
that only properties with selling prices up to $200,000 displayed a
pattern in which the majority of selling prices were below their
assessed values. Only in the $300,000 - $399,999 and $500,000 -
$599,999 price ranges were there an equal number of sales with selling
prices above and below assessed values. In all other price ranges, more
selling prices were above assessed values than were below.
next table provides some additional insight into the ratios between
residential selling prices and assessed values for non-distressed
sense is that when all things are considered, the assessed values
developed in conjunction with the 2013 revaluation by the Dare County
Tax Appraisal & Revaluation Office approximate actual selling
prices reasonably accurately. For the first nine months of 2014,
residential selling prices on average were within 15 percent of
While the selling price of each property always
indicates what a buyer is willing to pay and a seller is willing to
accept, the tax value of the property can serve as a valuable reference
point for buyers, sellers, and their agents to estimate the approximate
range of selling prices that might be reasonable for the property.
Questions and comments may be sent to Tom Hranicka at P.O. Box 280, Avon, NC 27915 or by e-mail to [email protected].
Copyright © 2014 Tom & Louise Hranicka. All rights reserved.