A home can have several different values at the same time.
Your county or local assessor may assign one value for property-tax purposes. A real estate agent may estimate another value based on recent sales. A mortgage appraiser may develop an independent opinion of market value. And the final sale price may be different from all of them.
Understanding the difference between assessed value and market value can help you make more sense of property taxes, home pricing and mortgage appraisals.
Key Takeaways
- Assessed value is used by a local government as part of the property-tax process.
- Market value estimates what a property would likely sell for under normal market conditions.
- Assessed value, appraised value and sale price can all be different.
What Is Assessed Value?
Assessed value is the value a government assessing authority places on property for taxation purposes.
Your local assessor may use information such as:
- Property size
- Lot characteristics
- Property type
- Age
- Condition
- Recent sales
- Neighborhood market data
- Improvements
But the exact assessment process depends on state and local law.
In some jurisdictions, property is assessed at or near estimated market value. In others, a percentage or assessment ratio is applied.
Exemptions, caps and other local rules can also change the taxable value.
What Is Market Value?
Market value is an estimate of what a property would most likely sell for in a competitive and open market under normal conditions.
That is different from simply saying market value equals the agreed purchase price.
A buyer and seller can agree to a price above or below what other market evidence supports.
Factors that can affect market value include:
- Recent comparable sales
- Property condition
- Size and features
- Lot characteristics
- Location
- Housing supply
- Buyer demand
- Current market conditions
An appraisal, comparative market analysis and automated valuation model can all attempt to estimate market value using different methods.
Assessed Value vs. Market Value
| Assessed value | Market value | |
|---|---|---|
| Primary purpose | Property taxation | Estimate of likely market price |
| Who determines it? | Local or government assessing authority | Can be estimated by appraisers, agents, AVMs and market participants |
| How often can it change? | Depends on local reassessment rules | Can change whenever market conditions change |
| Used for property taxes? | Yes, directly or as part of the calculation | May influence the assessment process but isn’t necessarily the taxable value |
| Used directly for mortgage LTV? | Generally no | An accepted appraised or other lender valuation may be used |
Is Assessed Value Usually Lower Than Market Value?
Not necessarily.
You’ll often hear that assessed value is always lower than market value, but that isn’t a reliable national rule.
The relationship depends on how the local jurisdiction assesses property.
For example, one jurisdiction might assess property at a fraction of estimated market value.
Another might assess near full market value.
And even where assessments are intended to reflect market value, the assessed value can lag because the last valuation date occurred before prices changed.
Exemptions, assessment caps and special tax programs can create additional differences.
How Is Assessed Value Calculated?
There is no single nationwide formula.
A simplified system might work like this:
Estimated market value × assessment ratio = assessed value
For example, if a jurisdiction assesses property at 40% of market value:
- Estimated market value: $400,000
- Assessment ratio: 40%
- Assessed value: $160,000
But that example does not describe every location.
A jurisdiction may instead assess property at full value, use a different statutory percentage or apply exemptions and other adjustments before arriving at the taxable amount.
Check with your local assessor for the rules that apply to the property you’re researching.
How Does Assessed Value Affect Property Taxes?
Assessed value is part of the property-tax calculation.
A simplified example might look like:
Taxable assessed value × applicable tax rate = property tax
But real property-tax calculations can be more complicated.
Depending on the jurisdiction, the final bill can be affected by:
- Assessment ratios
- Homestead exemptions
- Senior or disability exemptions
- Veteran exemptions
- Assessment caps
- Local levies
- School district taxes
- Special assessments
That means two properties with the same market value can sometimes have different tax bills.
Can You Estimate Property Taxes From the Current Tax Bill?
Use caution.
The seller’s current property-tax bill may not tell you exactly what you will pay after buying the home.
A sale can sometimes trigger reassessment, reset an assessment cap or change eligibility for exemptions.
The rules vary significantly by state and locality.
Before making an offer, ask the local assessor how a transfer could affect the property’s taxable value.
What Is Appraised Value?
Appraised value is an appraiser’s professional opinion of a property’s value for a specific assignment.
In a mortgage transaction, the appraisal commonly estimates market value using property characteristics and relevant market evidence.
An appraiser may analyze:
- Recent comparable sales
- Living area
- Condition
- Location
- Site characteristics
- Quality and design
- Market conditions
The resulting appraised value is separate from the government’s assessed value.
Our guide to how home appraisals work explains the mortgage valuation process in more detail.
Assessed Value vs. Appraised Value
These terms sound similar but serve very different purposes.
| Assessed value | Appraised value | |
|---|---|---|
| Primary purpose | Property taxation | Property valuation for a specific assignment |
| Determined by | Government assessor | Professional appraiser |
| Timing | According to local assessment cycle | As of the appraisal’s effective date |
| Mortgage use | Not generally the lender’s collateral value | Can be used in mortgage underwriting |
A lender may see the tax assessment as one piece of property information, but it does not simply substitute the assessed value for a mortgage appraisal.
How Do Lenders Determine the Value of a Home?
Lenders can use different valuation methods depending on the mortgage.
Those can include:
- Traditional appraisals
- Desktop or hybrid appraisals
- Automated valuation models
- Approved appraisal alternatives
The value used for mortgage underwriting is not necessarily the assessed value shown on the property-tax record.
For a standard Fannie Mae purchase transaction, for example, loan-to-value ratio is generally calculated using the lower of the purchase price or the current appraised value.
That distinction becomes important if the home appraises below what you agreed to pay.
What Is Sale Price?
Sale price is the amount the buyer and seller agree to in the purchase contract.
It is a transaction price, not automatically a determination of market value.
Suppose a home has:
- Assessed value: $310,000
- Appraised value: $390,000
- Contract price: $400,000
All three numbers can be legitimate because they answer different questions.
The assessed value addresses taxation.
The appraisal provides an opinion of market value for the mortgage assignment.
The $400,000 purchase price is what the buyer and seller agreed to pay.
Can a Home Sell for More Than Market Value?
Yes.
A buyer can agree to a price above the value supported by an appraisal or other market analysis.
This can happen in a competitive bidding situation or when a particular buyer places unusually high value on the property.
If the mortgage appraisal comes in below the purchase price, the difference creates an appraisal gap.
The buyer may then need to renegotiate, change the financing or contribute additional cash depending on the contract and mortgage structure.
Can a Home Sell for Less Than Assessed Value?
Yes.
An assessment doesn’t guarantee the price a buyer will pay.
A property may sell below its assessed value because of:
- Property condition
- A rapid market decline
- A motivated seller
- Limited buyer demand
- Assessment timing
- Incorrect or outdated assessment information
A sale below assessed value doesn’t automatically mean the buyer received a bargain.
The condition and market evidence still matter.
What Is Fair Market Value?
Fair market value generally describes the price a property would most likely bring under normal market conditions when both buyer and seller are informed, acting in their own interests and not under unusual pressure.
That makes fair market value a market concept rather than simply the last sale price or tax assessment.
A mortgage appraisal often attempts to develop an opinion of market value using this type of framework.
Market Value vs. Listing Price
The listing price is the amount the seller asks for the property.
It can be based on:
- A real estate agent’s comparative market analysis
- Recent comparable sales
- An appraisal
- Seller expectations
- Pricing strategy
A list price can be below, near or above market value.
Some sellers intentionally list below expected market value to generate competition, while others start above what recent sales appear to support.
Market Value vs. AVM Estimate
Online home-value estimates are commonly produced by automated valuation models, or AVMs.
An AVM analyzes property and market data to estimate value.
It can provide a useful starting point, but it isn’t automatically the property’s definitive market value.
Different models can produce different values because they may use different data and methodologies.
Our guide to automated valuation models explains how those estimates work.
How Do You Find a Property’s Assessed Value?
Property assessments are generally public records.
You can often find them through your:
- County assessor
- City assessor
- County auditor
- Tax collector
- Local property-search portal
The agency name varies by jurisdiction.
You may be able to search by:
- Property address
- Owner name
- Parcel number
- Assessor’s parcel number, or APN
Our guide to assessor parcel numbers explains how to locate and use an APN.
Can You Appeal an Assessed Value?
Usually, yes, through whatever review or appeal process the local jurisdiction provides.
Procedures and deadlines vary.
If you believe the assessment is incorrect, useful evidence can include:
- Incorrect property characteristics
- Incorrect square footage
- Recent comparable sales
- An independent appraisal
- Evidence of significant property condition issues
Follow the appeal instructions from the local assessing authority rather than assuming the process is the same everywhere.
Does a Higher Assessed Value Mean Your Home Is Worth More?
Not necessarily.
An assessment increase may reflect rising market values, a reassessment cycle, a change in local methodology or changes to the property.
But the assessment still exists primarily for taxation.
If you’re trying to determine what the home could sell for today, current comparable sales and other market evidence are more directly relevant.
Should Buyers Care About Assessed Value?
Yes, primarily because of taxes and property research.
Before buying, review:
- Current assessed value
- Current property-tax bill
- Local assessment cycle
- Available exemptions
- Whether a sale may trigger reassessment
But don’t treat the assessed value as proof that the asking price is high or low.
A $250,000 assessment doesn’t automatically mean a $350,000 listing is overpriced if the local tax system assesses property at less than full market value.
Should Sellers Use Assessed Value to Set a Listing Price?
Not by itself.
A tax assessment can provide another piece of information, but pricing a home generally requires more current market evidence.
A real estate agent may prepare a comparative market analysis using recent sales, active listings, condition and local market trends.
An automated estimate or professional appraisal can provide additional reference points.
Which Value Matters Most When Buying a Home?
It depends on the question you’re trying to answer.
| If you want to know… | Look at… |
|---|---|
| What property taxes are based on | Assessed or taxable value and local tax rules |
| What the seller is asking | Listing price |
| What you agreed to pay | Contract or sale price |
| What similar homes may support in the market | Comparable sales, CMA, AVM or appraisal |
| What value supports the mortgage | The lender’s accepted valuation |
Bottom Line
Assessed value and market value are different numbers used for different purposes.
Assessed value is established through a local government assessment process and helps determine property taxes. Market value estimates what a property would most likely sell for under normal market conditions.
Neither number should automatically be confused with the purchase price or appraised value.
When buying a home, look at all of them in context: the assessment can help you understand taxes, recent sales can help you evaluate pricing and the lender’s valuation can affect how the mortgage is structured.
FAQ
What is assessed value?
Assessed value is a value assigned by a government assessing authority for property-tax purposes. How it is calculated depends on local law.
What is market value?
Market value is an estimate of the most probable price a property would bring under normal open-market conditions.
Is assessed value the same as market value?
No. A jurisdiction may assess at market value, at a percentage of market value or under another method. Exemptions, assessment caps and reassessment timing can also create differences.
Is assessed value usually lower than market value?
Not necessarily. It depends on the local assessment system, the effective assessment date, exemptions and changes in the housing market.
Is appraised value the same as assessed value?
No. An appraised value is a professional opinion of value for a specific assignment. An assessed value is established for property-tax purposes.
Is market value the same as sale price?
No. Sale price is the amount a specific buyer and seller agree to. Market value is an estimate of the most probable price under normal market conditions.
Do mortgage lenders use assessed value?
Tax assessments can be one source of property information, but lenders generally rely on an accepted appraisal or other permitted valuation method when determining collateral value for a mortgage.
Can a house sell for more than its assessed value?
Yes. This is common in jurisdictions where assessments are below full market value or where assessment records lag current market conditions.
Can you appeal a property assessment?
Most jurisdictions provide some type of assessment review or appeal process. Deadlines, evidence requirements and procedures are determined locally.
Does buying a house change its assessed value?
It can, depending on local law. Some jurisdictions reassess following a sale, while others use scheduled reassessment cycles or limits on annual increases.
