Tax Assessed Value vs. Market Value

Home for Sale sign in front of house.
Image Credit: Andy Dean/iStock/Getty Images

Real estate values are moving targets, so your home's tax-assessed value might be lower than what you expected. Tax-assessed value differs also from market value. Market value represents the price a reasonably equipped buyer would pay for your house.

How Tax Assessors Figure

Your municipal tax assessor checks on home values to determine each property's tax liability. This assessment, which is derived from a tax appraisal, serves as the basis for your annual property tax bill. Tax assessors use information from recent home sales to arrive at an assessed value close to market value. Factors such as inflation, local rental rates and construction costs might affect the assessor's valuation.

How Market Values Measure Up

Real estate appraisers estimate market values largely by comparing your home to comparable home sales. A home appraisal is used for a purchase loan or refinance, or when selling your house. A home's true market value, however, is its sales price, if recently purchased. Tax-assessed values and market values often differ because assessors re-assess once a year -- sometimes less frequently. However, market conditions and market values change continuously, depending on larger economic factors.

references