Innacurate tax records
If you've been researching real estate for any length of time, or have listed your own home recently, we're sure you've noticed that many agents include "BTV" within their MLS descriptions and on their marketing materials. BTV stands for Buyer to Verify. This language is a disclaimer from the agent and seller telling the buyer that it's their responsibility to investigate and confirm a property's stated specifications.
The most common discrepancies we see are:
- Square footage differences between the tax records, MLS, previous MLS listings and builder data
- Bedroom count differences between the tax records, MLS, previous MLS listings and builder data
- On a large home (over 3,000 sqft.) a few hundred square foot difference between tax records and the MLS entry probably won't make or break your deal. However, on a small 1,000 square foot home, 300 square feet represents over 25% of the property's living space
Why are there different numbers?
For single family homes, especially an older property, the difference between public records and tax records is explained by property additions, remodels and modifications over the years. For example, the tax records may show a home is 2 bedrooms and 1,200 square feet. But, the home is listed today as a 5 bedroom with 2,800 square feet of living space. Explanation: possibly the addition of a master suite or a second floor, plus a little push here and there.
Townhomes are a little harder to explain because they really don't change in size over time. Typically, a discrepancy is introduced at some point during the property's first sale. The most common discrepancy we see is that the builder and seller data is larger than the official tax records
Within the MLS, the agent will disclose where they are getting their numbers:
- builder data
- seller stated
- tax assessors data
It is your job to verify and feel comfortable with this information as you move forward in the sale.
What happens during the bank or private appraisal?
The appraiser always starts with the public tax information first, and then builds an accurate square footage number from there. Most appraisers will tape (measure) the house as part of their assignment and compare their results to the tax records. If there is a large discrepancy, the buyer will have the option to:
- cancel their purchase
- renegotiate the price
- move forward with their purchase as is
For those who use square footage numbers to calculate a home's value, even 200 feet can translate in to huge dollars. For example, a 1,500 square foot home selling for a cool $1,000,000 would have a square footage cost of $666. Using creative math, some buyers might see a 200 square foot discrepancy as being worth over $133,000 in their favor. In other words, the home's value should be adjusted to around $870,000.
This example clearly illustrates why square footage numbers are only a data point when determining a home's listing price, and not the only factor considered.
Once the appraiser has finished their report, which includes comparing the target home to at least three other like properties in the area, they will establish one of the following:
- the home has appraised at the selling price
- they will give the home a dollar value appraisal, which may be higher, the same as, or lower than the selling price
- they will establish that the home has not appraised
What should you do?
If a discrepancy shows up in your home purchase, don't immediately assume that the seller is trying to cheat you. Do your research and try to understand where and when the erroneous numbers were introduced. And more importantly, decide if the difference really changes your opinion about the property.