Assessed Value Vs. Market Value: What’s The Difference?

Here’s a closer look at market value vs. assessed value, how they’re calculated and what they mean for you.

What Is Assessed Value?
The assessed value of a home is generally used for tax purposes. Though homeowners usually want their property values to grow over time, in this case, it’s better when the home’s value is lower. That’s because the higher the assessed value, the higher the property taxes.

Depending on your location, a municipal or county tax assessor will evaluate several factors, including any improvements you have made, whether you make any income from the property (from renting out a room, for example), the replacement cost of the home if it were destroyed and how much similar homes in the area are selling for.

In some cases, the assessor will come to your property to inspect it. Sometimes, however, they will complete the assessment remotely using software.

Next, the assessor will take the home’s value and subtract any tax exemptions you qualify for. That number is then multiplied by an “assessment rate” or “assessment ratio,” which is a fixed percentage set by each tax jurisdiction to determine the taxable value of your property. The assessment rate is typically 80% to 90%. Local tax officials will then calculate the property taxes based on the assessed value.

For example, say the assessor determines your home is worth $150,000 and the assessment rate for your county is 80%. That would mean your assessed value is $120,000. That’s the amount that will be used to calculate your local property taxes. This is done on an annual basis, and the information becomes public record.

What Is Market Value?
>> Market value is used by lenders, buyers and sellers to estimate the appropriate selling price given current market conditions. It’s essentially the value that assessors attempt to come up with before applying the assessment rate.

An easy way to think about market value is this: What would a prospective buyer be willing to spend on a particular home and/or what would the seller be willing to accept if it were sold today?