Assessed Value vs Market Value: What’s the Difference

When it comes to determining the value of your home, there are two terms that you should be familiar with: Assessed Value and Market Value. While they may seem similar, they are actually quite different. In this article, we will explain what each term means, how they are calculated, and why they are important.

Understanding Assessed Value

Assessed value is the value that your local government assigns to your property for tax purposes. This value is used to determine how much you will owe in property taxes each year. The assessment is usually done by a government employee or a contractor hired by the government. They will look at a variety of factors, including the size of your property, the age of your home, and any improvements that have been made.

Factors That Affect Assessed Value

There are several factors that can affect the assessed value of your home. Some of the most common factors include:

• The size of your property
• The age of your home
• The condition of your home
• Any improvements that have been made
• The local real estate market
• The location of your property

The Assessor, or Contractor, does not typically view inside of your home, and most of their valuation comes from local data from pulled permits, Google Map images, and/or a drive-by view of the property.

How Assessed Value is Calculated

The assessed value of your home is calculated by multiplying the tax rate by the assessed value of your property. The tax rate is set by your local government and is usually a percentage of the assessed value of your property. Most tax rates include things like:

• General Local Tax
• Levies for things like schools, fire stations, and libraries
• Road maintenance
• Storm Water Management
• And some localities have a charge for Irrigation, or Household Water Usage that is included in property taxes, in lieu of being charged separately.

These are just some of the numerous taxes applied to your assessed value. Each state, county, city, and municipality have their own specific needs, and these differ widely from state to state.

If you are curious what goes into your property taxes, you should receive a tax statement at least once per year, preceding the next tax year. If you don’t have that, or are looking to purchase a home and want to know the taxes, most counties have a website for the Assessor or Treasurer’s office you can look it up. Here is an example for Spokane County, WA provided by the Treasurer’s office; Property Information Search.

Understanding Market Value

Market value, on the other hand, is the value that your home would sell for on the open market. This value is determined by a variety of factors, including the condition of your home, the local real estate market, and the location of your property.

Factors That Affect Market Value

There are several factors that can affect the market value of your home. Some of the most common factors include:

• The condition of your home
• The local real estate market
• The location of your property
• Recent sales of similar homes in your area
• The size of your property

How Market Value is Calculated

Market value is usually determined by a professional Appraiser. They will take a variety of factors into account, including the condition of your home, the local real estate market, and recent sales of similar homes in your area. You can hire an Appraiser yourself, if you are preparing to list your home on the market and want an estimate of market value. But Appraisers typically are involved from when someone is trying to purchase your home, and the Lender requires it as part of the loan process.

Why Assessments and Appraisals are Important

Both assessed value and market value are important because they can affect your finances in different ways. Your assessed value is used to determine how much you owe in property taxes each year, while your market value is used to determine how much your home is worth if you were to sell it.

What if my Market Value is Higher than my Assessed Value?

This can happen from time-to-time where you get an appraisal on your home, and your value comes in less than what the county has your home assessed at. If this is the case, or you just feel your home is generally assessed too high, you can request a re-valuation through your County’s Assessor’s Office. The process and timeline to do that varies from county to county, so it is important you find up-to-date information on the process either by contacting the Assessor’s Office directly, or finding your answer on their website.

Conclusion

Assessed value and market value are two different ways to determine the value of your home. While assessed value is used for tax purposes, market value is used to determine how much your home is worth on the open market. Both values are important and can affect your finances in different ways. Understanding the difference between the two can help you make informed decisions about your home.

FAQs

What is the difference between assessed value and market value?
Assessed value is the value that your local government assigns to your property for tax purposes, while market value is the value that your home would sell for on the open market.

How is assessed value calculated?
Assessed value is calculated by multiplying the tax rate by the assessed value of your property.

How is market value calculated?
Market value is usually determined by a professional appraiser. They will take a variety of factors into account, including the condition of your home, the local real estate market, and recent sales of similar homes in your area.

Why are assessed value and market value important?
Assessed value and market value are crucial in real estate. The assessed value, used by local governments for tax purposes, determines property taxes owed. Market value, the potential selling price in a free market, guides sellers in pricing and buyers in making offers, influencing real estate decisions.

What if my market value is lower than my assessed value?
You may be able to request a re-valuation from your county Assessor’s office. Contact them directly, or find the process on their website.