Definition
Market Value and Assessed Value are two different property valuation methods:
- Market Value is the estimated price a property would sell for in the open market, based on buyer demand, comparable sales, and current economic conditions.
- Assessed Value is the valuation determined by a local tax assessor for the purpose of calculating property taxes.
These values often differ, as assessed values are not updated as frequently as market values and are typically lower than the actual selling price.
Explanation
Understanding the difference between market value and assessed value is crucial for buyers, sellers, and investors:
Market Value
✅ Determined by: Recent home sales, property condition, location, and market trends.
✅ Used for: Real estate listings, appraisals, and mortgage approvals.
✅ Fluctuates frequently based on demand and economic conditions.
Assessed Value
✅ Determined by: Local tax authorities using mass appraisal methods.
✅ Used for: Calculating property taxes (not for buying/selling decisions).
✅ Updated annually or every few years (varies by jurisdiction).
How Market Value and Assessed Value Differ
| Feature | Market Value | Assessed Value |
|---|---|---|
| Purpose | Determines home sale price | Calculates property taxes |
| Who Determines It? | Appraisers, real estate agents | Local tax assessor |
| Update Frequency | Frequently (based on market trends) | Annually or every few years |
| Influenced By | Buyer demand, interest rates, economy | Tax assessment formulas |
| Typical Value | Higher than assessed value | Lower than market value |
Example of Market vs. Assessed Value
A homeowner lists their property for $500,000, based on recent sales in the neighborhood (market value).
- The local assessor values the home at $400,000, meaning the homeowner pays property taxes on the $400,000 assessed value.
- If the home sells for $525,000, its market value increases, but its assessed value may stay the same until the next tax reassessment.
Why the Difference Matters:
- Homebuyers & sellers rely on market value, not assessed value, for pricing decisions.
- Property taxes are based on assessed value, which may be higher or lower than actual market value.
- Investors analyze both values to assess a property’s tax burden vs. potential resale price.