Assessed Value Vs. Market Value

Are you struggling to understand what is assessed value vs. market value? When buying or selling real estate, both values can influence your decisions. Understanding these terms can help you decide whether a home is within your budget.

Let’s break down assessed value vs. market value so you know the difference when a real estate agent mentions these terms.

What Is Assessed Value Vs. Market Value?

If properties in a town, city or municipality are assessed at 100% market value, that becomes the assessed value. However, if properties assess at less than the market value, the assessor calculates your property’s assessed value based on multiplying the market value by the area’s assessment level.

While the assessed value is influenced by the market value, they are different valuations for the pricing of real estate. A real estate agent will provide you both values when you’re considering a home.

Assessed Value

The assessed value, also known as the tax-assessed value, calculates the worth of real estate to determine property taxes. It’s influenced by the location and comparable sales of nearby homes. Mortgage lenders may use this valuation to determine how much you should put into escrow.

Typically, the assessed value is lower than the market value of a home.

Market Value

Market value determines how much a home will sell for based on current market conditions. This helps homeowners determine if an offer is acceptable and estimates how much home buyers are willing to spend on a home. It’s frequently compared to the appraised value of real estate.

While they may sound similar, market value and fair market value are two different estimates for your home. The fair market value assumes that both the buyer and seller are informed, unpressured parties. It is a hypothetical estimate of what a home would sell for if listed. The market value is the actual price of a home that appears on a listing, which may shift from the fair market value depending on the state of the housing market.

How To Calculate Tax-Assessed Value And Market Value

Since both these valuations have a strong impact on the sale of your home, it’s important to know how these numbers are calculated. Knowing this can benefit both home sellers and home buyers.

Calculating Tax-Assessed Value

The tax-assessed value of your home can vary widely based on a few factors. When estimating, find real estate comps to learn the average price of homes in the same area.

While real estate comps will give a general idea of the current price of a home, keep in mind specific home improvements you’ve made recently. It may be worth considering improvements before listing your home to increase the value. Sometimes, small improvements can make big changes to the tax-assessed value of real estate.

These factors all contribute to the assessment rate of your home. Once the assessment rate is determined by an assessor, it’s multiplied by the market value to calculate the tax-assessed value.

Market Value x Assessment Rate = Tax-Assessed Value

For example, let’s say you own a home with a market value of $115,000. Your home is then assessed to be at 85% of market value.

115,000 x .85 = $97,750

So, the tax-assessed value of your home would be $97,750. This is why the tax-assessed value is normally lower than the market value. When an area is assessed at 100% of market value, then the tax-assessed value is the same as the market value. If you’re ever unsure, you can use an assessed value vs. market value calculator to determine the valuation, if you have the market value and assessment rate of your home.

The tax-assessed value is then used to calculate property taxes. Property taxes are unique to the location and condition of your home and vary based on the quality of your real estate.

Calculating Market Value

The market value of your home is calculated using a few different measures.

Home appraisals play a part in estimating the market value of your home. Appraisers will examine the interior and exterior of a home to determine its value. You can hire an appraiser to help calculate the market value of a home before selling.

The current housing market also impacts the market value. Elements of the market like the current supply and demand of housing, along with interest rates, may change the market value of real estate. These factors are not influenced by the homeowner but may help determine if it’s better to sell early or hold off until market conditions shift.

Unlike the tax-assessed value, there is no formula to get the market value of your home. The best way to get an exact number is to reach out to a real estate professional. However, you can look at the listing prices for homes of comparable size and location to estimate the price range of your home.

FAQs About Assessed Value Vs. Market Value

Now that you know the difference between tax-assessed value vs. market value, let’s cover any other questions you might have.

How close to market value is the assessed value?

Typically, the market value of a home will be close to the assessed value, but it will depend on the assessed rate of your real estate. Most of the time, the market value will be higher than the assessed value. The assessed value will always be equal to or lower than the market value, since it is a percentage of the market value.

Is market value more than appraised value?

The market value of a home may be more or less than the appraised value. The appraised value is based on the quality and the condition of the home. Whereas the market value is influenced by the current state of the market, which is what buyers and sellers can afford.

So, depending on the state of the economy, the market value may be significantly different from the appraised value of a home.

Is market value the same as dollar value?

The dollar value changes depending on a variety of factors. Whereas market value is based on the location, the quality of a home and the current housing market.

How often do market value and assessed value change?

Market value fluctuates constantly. The assessed value will only change when your property is reassessed. Depending on where you live, state or local laws will determine how often your real estate needs to be assessed. Some locations have assessments as frequently as once a year.

Can you dispute the assessed value?

If an assessor determines the assessed value, but you think it’s too low or high, you may dispute it. You’ll have to submit an appeal, where you can list the qualities of the home that the assessor may have missed. However, there’s no guarantee that doing so will change the assessed value.

The Bottom Line

Understanding the difference between tax-assessed value vs. market value can help you make more informed decisions when buying or selling a home. Connect with an agent today to learn more about the assessed value and market value of your home.