Should my land sell for at least the county assessed value?

What is the difference between assessed value and market value?

Market value is the price a knowledgeable buyer would pay and a willing seller would accept in an arm's-length sale. Georgia's Department of Revenue uses close to these words for fair market value, and Texas defines market value as the price at which property would transfer for cash under prevailing market conditions.

Assessed value is the number the tax office multiplies by the tax rate. In some states it is meant to equal market value. In others it is a fixed percentage of market value, a capped figure, or a value based on what the land can produce as a farm or timber tract. So the assessed value on your bill can be a fraction of what the land is worth, or more than a buyer will pay.

Why can the county value be higher than what buyers offer?

Counties value thousands of parcels at once with mass appraisal. They do not walk every lot. Several things that buyers care about can be missed or priced in only partly.

• No legal road access. A landlocked lot can carry the same per-acre value as its neighbors on the roll. See our landlocked property guide.
• Flood zone or wetlands. Part of the lot may not be buildable. Check the FEMA Flood Map Service Center.
• No power, water or sewer, or a lot that will not pass a septic test.
• An old value. If the last reappraisal came before a market drop, the tax value can sit above current sales.
• Title problems, back taxes or many heirs. These lower what a buyer will pay but do not change the tax value.

Why can the county value be much lower than market value?

The opposite is common too. In Georgia and Alabama the assessed figure is a set fraction of value by law, so it will always look low. In California, Proposition 13 limits increases to 2% a year until the land changes owners. In Texas, land with an agricultural or timber appraisal is valued on what it can produce, which the Texas Comptroller says is usually lower than market value.

Counties that reappraise only every few years can also trail a rising market. North Carolina allows up to 8 years between reappraisals, although the state recommends every 4 years. If your tax value is low, do not use it to price your land. Use recent sales of similar land instead. Our land value estimator and state pages such as Texas land prices are a start.

How do I find my land's real market value?

Start with sold prices, not asking prices or the tax roll. Then adjust for what makes your parcel different.

• Find 3 or more sales of similar land in the same county from the last 12 to 24 months. The county recorder, a local agent or an appraiser can help.
• Compare size, road access, utilities, zoning, flood zone and terrain. A recent sale very close to yours and very similar to it is the best single guide.
• Where recorded deeds do not show the sale price, asking prices and local agent data are the main clues.
• For a high-value tract, or for an estate or divorce, pay for an independent appraisal.
• See what is my land worth for the full method.

What happens if I sell my land for less than I paid for it?

You have a loss when your adjusted basis is more than the amount you realize from the sale, as IRS Publication 544 explains. Your basis is usually what you paid plus certain purchase costs and improvements (IRS Publication 551). Your amount realized is the price minus your selling costs.

The tax effect depends on why you held the land. Land held as an investment is a capital asset. A net capital loss can offset capital gains, and then up to $3,000 a year of other income ($1,500 if married filing separately). Any extra loss carries forward to later years (IRS Topic 409). A loss on land held for personal use is not deductible. A loss on a sale to a related person, such as a spouse, parent, child or sibling, is not deductible either. Land used in a business may fall under Section 1231 rules instead.

If you inherited the land, your basis is usually the fair market value on the date of death, not what the original owner paid. That means many heirs have little or no gain even when the price seems low. See how inherited property is taxed when sold.

General information, not legal or tax advice. Ask a tax professional about your own basis and loss.

Does selling below assessed value change my property tax?

It can. Many assessors use recorded sales to set future values, and in California a change in ownership sets a new base year value at the sale price. A low sale can help bring down the values of similar land in the area, and a high sale can push them up.

If you keep the land and think the value is too high, you can appeal. Texas owners protest to the appraisal review board. Georgia and North Carolina have county appeal processes with deadlines after the assessment notice. Check the notice for the deadline.

Should I use the assessed value to judge a cash offer?

Use it only as a rough check. A cash buyer usually pays below full retail value in exchange for speed and certainty, and the gap to the tax value can look large or small for reasons that have nothing to do with the offer. Compare any offer with recent sold prices and with what you would net after commission, closing costs and months of holding costs if you listed. See how cash offers for land work and closing costs when selling land.