<p>The financial columnist with our local paper wrote a "helpful hints" column on filling out the FAFSA and Profile. She suggested reducing the appraised (not market!) value of your home by 8%. This reduction reflects the realtor and closing fees for selling your house if you had to liquidate the asset! This is actually a more accurate valuation of your home!</p>
<br>
<blockquote> <p>She suggested reducing the appraised (not market!) value of your home by 8%.>></p> </blockquote>
<br>
<p>That's an "interesting" idea...but I don't think you can just "reduce the appraised value of your home". Where I live, appraisals are done by the towns every five years. As a property owner, I just can't decide that my house is worth 8% less than that!</p>
<p>You're not saying the house is worth 8% less. You're simply reflecting actual costs of liquidating it. Totally valid.</p>
<p>The appraised value is NOT set by the homeowner, but by the assessor. It cannot be changed. I can't imagine where the author of the article got the idea that you could subtract the cost of liquidating, and why she suggested tha arbitrary figure of 8%.</p>
<p>The Ivy I interviewed for required the MARKET value anyway, which is much higher than the appraised value.</p>
<br>
<blockquote> <p>The appraised value is NOT set by the homeowner, but by the assessor. >></p> </blockquote>
<br>
<p>Thank you Nedad...this is what I was trying to say...but you said it better!!</p>
<p>Not every State has assessors. In CA, for example, your property tax is a fixed percentage of the house's purchase price. An 8% is not arbitrary given a 6% fee to the realtor and 2% closing costs are typical in many markets.</p>
<p>This guy's info is hardly unique. My accountant told me this years ago.</p>
<p>If the house needs insurance or needs to be sold or refinanced, and (in a town that asseses), the every-5-or-7-year assessment date has passed, then it is STILL assessed by an assessor. You can't just tell the finance company or insurance company what YOU think it is worth.</p>
<p>And again - the forms want the MARKET value. If they did not, then California residents with a million or more in assets (equity in house) could put down the original purchase price, even if it was $25,000! </p>
<p>Same with people in the rest of the country, even with a CURRENT assessed value. That is because assessments (say, in my state) are routinely SET at around 70% of the market value as of the date of the assessment. Your net worth would be wrong if your house could be sold for one million but you put down $700,000.</p>
<p>So to repeat: [ul]
[<em>] House assessments are done by professional assessors, whether they are hired by the town, state, bank, or homeowner
[</em>] Current MARKET value is what is considered in determining assets/net worth[/ul]</p>
<p>There is NOTHING arbitrary about the information suggested by the columnist. She researches and documents her suggestions and consulted with several public and private finaid officers before writing. The assessed value of the home is determined by one's local taxation authority. It is the value of the home on which you pay taxes. The only way to truly determine the market value of a home is to sell it. Even using "comparables" is not accurate since the market value fluctuates by season, local economy, local development efforts, etc. Her suggested reduction of 8% reflects the current, normative realtors and closing fees for our local market. If I were to liquidate my home (i.e., treat it as an asset which could be used to pay for college), I would need to pay 8% in fees and therefore, 8% less would be available. This is a legitimate and easily justified approach to providing home equity value. Please feel free not to follow the advice offered....</p>
<p>As a long time Realtor, I would have to say that I agree with boxmaker. In fact I use some of his language in every one of my Market Analysis when I am trying to determine the market value of a property. That is "the true market value of any property is always determined by an agreement between a willing buyer and willing seller". Until you actually put your house on the market you cannot KNOW the real market value.</p>
<p>A tax assessor uses a very broad brush in determining value. They can be actually below or above the market. They are normally slightly below the market but not always. When I am trying to find the market value of a home I rarely look at the tax assessors valuation. They just are not an accurate reflection of any specific home. There are so many variables that determine the market value that you really cannot easily enumerate them all. </p>
<p>The market value of a home is ALWAYS changing. In many places it changes month to month. </p>
<p>So, when you are asked to determine the market value of your home you are being asked to name a somewhat arbitrary number. Even if you have it appraised for the purpose, that does not mean that is the market value. I have often sold homes with recent appraisals for a much higher or lower than the appraised value. When I first got into real estate I was intimidated by a recent appraisal. I just assumed that the appraised price must be the value. After gaining experience, I realized that when an appraiser is trying to name a value on a home they are shooting in the dark. When they have a sales price agreed on by a buyer and seller, they have a good target.</p>
<p>I see nothing wrong with reducing the value by 8%. That is the number you would be taxed on after all. Most appraisers will admit that unless they are appraising a home with many recent identical comparable sales, they can easily be off by more than 8%. They will never admit it to you after they have just handed you the appaisal and the bill. But they will admit it to me in casual conversation.</p>
<p>I would have to disagree with the advice to mark down your home value by 8% or any other amount to reflect the estimated cost of selling. Many homes are sold "by owner," through a reduced fee real estate agent, or in an arranged sale between parties that already know each other. This is particularly common if the owner happens to be an attorney, who, right or wrong, feels he (or she) can represent himself better than any realtor. Truly required closing costs are usually minimal, only a couple hundred dollars for deed preparation and recording. They can go much higher when the seller agrees to do things like pay points to buy down the buyer's interest rate, or property taxes are prorated, but those are optional or highly variable and thus not fit for a universal rule.</p>
<p>You have to go back to the question asked on Profile, which is "what is the current value of your home." It is cheating to report only 92% of that value.</p>
<p>The people advising that you should lower your home's value by 8% are also the ones telling you to transfer money from a child's name to your own. Or whoever advised couples I know to get divorced so they only have to report one parent's income on the FAFSA. Some of this may be technically legal, but I like to sleep well at night.</p>
<p>I am astounded that anyone would consider this advice to be unethical. The analogy would be to tax avoidance versus cheating on taxes. There is nothing illegal -- or unethical -- about the former. Of course, do what you feel is proper.</p>
<p>This suggestion was offered by a well-known financial advisor, based upon conversations with financial aid officers at well-known private and public institutions. It is as "accurate" as any other financial advice. </p>
<p>Let me state once more: If you not agree or do not want to follow this advice, do what you want.</p>
<p>Youre on target Boxmaker. People tend to puff themselves up when applying for credit. This is a terrible idea when it comes to financial aid. For the Profile, the market value of your home is what someone is willing to pay for it on the day you file the Profile. If you had to sell your home on the day you filed Profile, I think it is quite reasonable to factor in a realtors commission, costs of any repairs, and your weaker bargaining position from having to sell it immediately. Its not being dishonest to list your homes market value in terms of its net value, not the gross value.</p>
<p>An 8% reduction seems reasonable to me - in my state realtors run 6-7% and probably 2-3% in transfer taxes and sales fees.</p>
<p>But aren't we dealing with some confusion here with "appraisals"?? The appraised value of a house at time of sale should be close to the sales price (market value)....naturally there are variations for area, defects the buyer did not notice, etc., but the 2 figures should be somehwat near each other.</p>
<p>An appraisal done for tax assesment...either every so many years at a certain percentage of market value (in my state, every 6 years at 35% of value, while nedad's state uses different figures), or by a math formula...is a very different animal.</p>
<p>Seems to me if I listed my home at a $35K value, combined with our supporting IRS docs for a very middle class life, I'd be asking to be tossed in the circular file by most finaid offices.</p>
<p>"If your parents own a home, fill in how much the home is worth. Use the price they could reasonably expect to receive for their home if it were sold today. Dont use assessed, insured, or tax value."
College Board instructions for 2005-6 Profile, Questions 40d-e</p>
<p>Look at it another way. Lets say you have a home thats value is $200000 and a mortgage of $100,000 leaving net equity of $100,000. A financial aid officer could as part of your EFC want 5.6 % of that equity or $5600. Lets say however you sell this house but the buyer wants a new roof with a cost of $20,000. (Dont write back with idiotic comments about that must be some roof). The point is that you had to pay $20,000 for the roof and will only get $80,000 out of the deal at closing. 5.6% of $80,000 is $4480. So if you want to list your market value as $200,000 (minus $100,000 mortgage), be comforted in knowing that youve potentially lost $1120 in aid ($5600-4480). This could be good for your ego that your house is worth so much, but very bad for your pocket book. If you dont take into account a realtors commission, its even dumber.</p>
<p>Hey our house would need a new roof before we could put it on the market- not to mention paint inside and out, upgraded wiring/plumbing and perhaps even some insulation.
Our assessed value is not based on our house, or even on what we paid for it. It is based on what some houses ( which are larger/have views/newer) have sold for recently in our zipcode. The kicker is that our zipcode like others I suspect is oddly shaped, it incorporates houses up the hill with a great view, as well as houses on the flat in the industrial section as well as houses next to the water. I should pay because someone has the money to put $200,000 into a house three blocks away and then sells it for $ 600,000?</p>
<p>The question about your home usually involves market value and equity, depending whether you are doing official forms or an individual schools forms. Who can really say what the accurate market value is? BAsically, if you had to sell it what would you get for it. I would think there is enough leeway in that number to adjust for repairs and fees, especially in higher priced states.......if your home is worth $1 million vs $1.1 million-who is going to argue with you? $500k or $550k, who can say?</p>
<p>Profile says "reasonably expect to receive" so tell them the reasonable amount, if you want to deduct for repairs and fees, be sure to keep good notes in case you are questioned.</p>
<p>My friend has been trying to sell her home in an unusual area for several years, it has been listed, but not sold- what value does she put? The listing value? Some waaay lower fire sale number?</p>
<p>Someone Mom is right about reasonably expect to receive. Whether something is reasonable is a question of the facts. And its certainly reasonable to consider the costs in fixing up and selling your house in determining what you can reasonably expect to receive. You cant be too piggish, make up all sorts of repair costs (unless its true and you have evidence that supports the costs), and claim your homes market value is absurdly low. The schools have a way of checking on what your homes value is when on the profile they ask what you paid for your house and what year you bought. Its called the Federal housing index multiplier. Go on some search engine and check it out.</p>
<p>When you specify the value of the house you live in, aren't you also asked to enter the state and county where this house is located? I remember reading somewhere that colleges use median house values per county that are available each year from the US Census bureau. If that's indeed true, I don't think it matters much what number you give on the CSS profile when it comes to the value of your house: if it's lower than the median county value, they'll use the median county value anyway. However, if it's higher, I think they might use the higher number. Therefore, I would see how your numbers compare to the median numbers for your county.</p>