Chain of Lakes with text and shading

As a real estate agent, to prepare for each showing, I look up and print off the county tax record for the property. The tax record is helpful because it shows who the owners are, how the property is zoned, what the property is assessed for, and how much the property taxes are.

When I share tax records with buyers, their eyes often fixate on the property’s assessed and “fair market” values. These values are often dramatically lower than the property’s list prices. So much lower that buyers often assume the property is overpriced.

The Facts

The facts tell a much different story.  The following chart compares assessed values vs. sale prices of properties on the Chain O’Lakes in Waupaca in 2021 and 2022.

Sold Price Vs Assessed Value

As you can see, the assessed values range from 45% to 87% of the sale price. On average, properties were assessed at only 59% of what they sold for. Put another way, on average, properties sold for 1.7 times their assessed value.

To understand why, it’s helpful to know what assessed and so-called “fair market” values are and how they are determined.

How Assessed Values Are Set

Assessed and fair market values are used to calculate property taxes. Updating them each year is unnecessary because they represent the relative value of how properties compare to other properties, not their current market values. Even if market values increase each year, how properties compare in value is relatively constant, so assessed values do not need to be annually updated.

Municipalities are responsible for updating residential assessed values. The process is expensive since every property in the municipality must be reassessed during the revaluation process. This can take a lot of time because assessors often need to visit properties and respond to questions from nervous property owners. As a result, some municipalities may go a decade or more between revaluations.

Understanding Fair Market Values

Fair market values are calculated by multiplying assessed values by a factor determined annually by the county. The factor is designed to compensate for differences in how municipalities assess. For example, if one city just completed a revaluation, its assessed values will be much higher than those in a township that hasn’t revaluated in ten years.

Bringing these municipal assessed values into relative balance is important because school districts and counties charge property taxes too. The taxes are calculated by multiplying the fair market values of properties within their boundaries by a small percentage. If assessed values were used instead of fair market values, properties in municipalities with the lowest, most outdated assessed values wouldn’t be paying their fair share.

The Takeaway

Buyers should not confuse assessed or fair market values with actual market value. They measure different things at different points in time. In 2021 and 2022, residential properties on the Chain O’Lakes sold for 1.7 times their assessed values on average. How much assessed and market values differ varies by municipality and depends on how long ago they completed assessment revaluations.