Understanding Market Value vs. Assessed Value
When it comes to real estate appraisals, many homeowners are confused about the difference between market value and assessed value. While both terms relate to a property’s worth, they serve different purposes and are calculated differently.
Whether you’re buying, selling, refinancing, or appealing property taxes, understanding the distinction between market value vs. assessed value can help you make informed decisions.
What Is Market Value?
Market value is the price a willing buyer and seller would agree upon in an open and competitive market. It reflects what your home is worth based on:
- ✅ Recent comparable sales (comps) in your area
- ✅ Current real estate market conditions
- ✅ Your home’s size, location, condition, and features
- ✅ Demand for homes in your area
A certified real estate appraiser determines market value during a home appraisal. This value is commonly used for:
- Home sales – Helping sellers price their property competitively.
- Mortgage financing – Ensuring lenders don’t over-lend on a home.
- Estate settlements and divorce appraisals – Establishing a fair asset division.
- Tax appeals – If a homeowner believes their property is overvalued for tax purposes.
The market value of a home fluctuates based on supply and demand. If the real estate market is hot, home prices may increase. If demand drops, so does the market value of properties.
What Is Assessed Value?
Assessed value is the value assigned to a property by the local tax assessor’s office to determine property taxes. This value is often lower than market value and is calculated based on:
- ✅ A percentage of the market value (assessment ratio)
- ✅ Property characteristics (size, age, location, and condition)
- ✅ Improvements or renovations
- ✅ Local tax rates and government calculations
The assessed value is primarily used for property tax purposes and does not necessarily reflect what a buyer would pay for a home. In many cases, assessed values are updated annually or every few years by local government offices.
Key Differences Between Market Value and Assessed Value
Factor | Market Value | Assessed Value |
---|---|---|
Definition | The price a buyer is willing to pay for a home in the current market. | The value assigned by a tax assessor for property tax purposes. |
Who Determines It? | A licensed real estate appraiser. | The local tax assessor. |
How It’s Used | Home sales, mortgages, refinancing, estate planning, and legal settlements. | Calculating property taxes. |
How It’s Calculated | Based on recent comparable sales, property condition, and market trends. | A formula set by local tax authorities, often using a percentage of market value. |
How Often It Changes | Fluctuates with market conditions. | Updated yearly or every few years based on government assessments. |
Can It Be Appealed? | No, unless a home appraisal is challenged. | Yes, through a tax appeal process. |
Why Is My Assessed Value Lower Than My Market Value?
Many homeowners notice that their assessed value is significantly lower than their market value. This happens because tax assessments are not updated as frequently as the real estate market fluctuates.
For example:
- If your area has seen a recent surge in home prices, your market value may have risen faster than the assessed value.
- Conversely, if home values have dropped, your assessed value may be higher than what your home is worth, leading to higher property taxes.
This is why it’s important to periodically review your property tax assessment and consider appealing it if you believe it’s too high.
How to Appeal an Assessed Value That’s Too High
If you think your property has been over-assessed, you can file a tax appeal with your local assessor’s office. To build a strong case, you should:
- ✅ Obtain a professional real estate appraisal from a licensed appraiser.
- ✅ Gather recent sales data (comps) of similar homes in your area.
- ✅ Check for assessment errors, such as incorrect square footage or property features.
- ✅ File an appeal before the deadline set by your local tax office.
A low assessed value can be good because it means lower property taxes, but if you’re selling your home, a higher market value benefits you. Understanding both values helps you make informed real estate decisions.
Final Thoughts
The market value and assessed value of a home serve different purposes:
- ✔ Market value is used for real estate transactions like buying, selling, and refinancing.
- ✔ Assessed value is used by local governments to calculate property taxes.
If you need a professional home appraisal in Boise, Garden City, Eagle, Nampa, Middleton, Caldwell, Horseshoe Bend, Idaho City, Donnelly, McCall, Star, Meridian, or Kuna, Idaho, contact IdaHome Appraisal, Inc. today!
📞 Contact us today for a home appraisal you can trust!
Meet the Author
Joshua L. Darrow is a seasoned Certified Residential Appraiser with 20 years of experience in the appraisal industry. He specializes in providing comprehensive residential appraisals for various purposes, including mortgage/lending for conventional and FHA-insured loans, estate appraisals for tax purposes, divorce appraisals, partition action appraisals, market value appraisals, pre-listing appraisals, for sale by owner appraisals, tax appeal appraisals, and measurement services. Known for his commitment to integrity, Joshua delivers non-biased, objective appraisal reports with the utmost professionalism and accuracy.