Taxable value equals market value?

Perhaps you've heard people talking about their property value saying things like "Well Zillow says..." and "The county says my market value is..." but who is right? Let's look at some examples from near the heart of Northfield.

First some facts, then some analysis.

802 College Street, Estimated Market Value (EMV) from Rice County is $126,100 for 2013. Listed for $199,900 in Summer 2012.

818 Washington Street, EMV $140,700 in 2013, listed for $198,900 in Spring 2013.

105 9th Street West, EMV $140,600 listed for $208,000 in Fall 2012.

312 Woodley Street East, EMV $204,900 listed for $199,000 in Spring 2013.

Now, I can hear you saying "but these are listed, not sold!" You're right. But you can see that evidently there isn't much of a direct relationship between the EMV and the listing price. How about some sold data from Northfield Minnesota, Summer 2012 - Spring 2013?

According to state guidelines, the goal of the EMV is to be within 10% or so of actual, real live, market value. So if EMV is apparantly only related by coincidence, what actually does determine market value? What's the formula?

A property is only worth what a ready, willing and able seller will accept from a ready, willing and able buyer, so the saying goes.

A professional Realtor determines the market value of a property through a complete analysis of comparable properties and market conditions. This includes looking at things on both micro and macro levels, but we're mostly concerned with one specific house and its immediate and most relevant competition. Using at least 3 good sold comparables and 3 good active comparables a price range emerges which will guide the seller in authorizing a competitive price.

So what do you do with these comps? What makes them comps in the first place?

This is where the Zillow and Trulia questions come in. If you check automatic valuations (online property value calculators) you may notice some interesting trends over time. Most of those valuators care about only one thing: sale price. Property features are not factored in at all. So your 4 bedroom 3 bath 2500 square foot house could be worth $200,000 today, but if a vacant lot sells for $50,000, your value will plummet, and then when the mega-mansion sells for a million your equity is back baby!

I select comps based on compatibility (like Match.COM). It helps to have the same number of bedrooms, bathrooms, square footage, garage stalls, and even better if they're all in the same place in the house and on the premises. Adjustments must be made using current pricing standards for all the differences in cosmetic materials and appeal, and other relevant differences. This is what determines the price range. Using the sold comps gives an idea of what people have paid and what it should appraise for when the time comes, and using the actives gives a sense of how competitive the appeal will be to a buyer who must choose from what's available.

Offer a better product at a better price and you'll sell first, which is the goal after all. How many buyers are out there? I don't know, but I want the next one to buy my listing.