Assessed Value Vs. Appraised Value: A Beginner’s Guide

What is a home’s assessed value? What is its appraised value? What are the differences, exactly? Assessed value estimates a property’s general worth, whereas a home’s appraised value functions as an expert’s estimation of what it’s worth. Here’s how assessed and appraised value differ in practice, and how each valuation may influence your real estate investment decisions.

Home Value: Your Home’s Worth And How It’s Determined

A home’s worth and the amount that it can potentially sell for is based on three main types of evaluations: fair market value, assessed value and appraised value. Each assessment serves a specific purpose to determine the value of a property.

Fair market value is defined as the price that a property might be expected to sell for in an open market. In contrast, an assessed value estimates a property’s worth based on input from government tax assessors and determines how much that an owner can expect to pay in property taxes.

As for an appraised value, consider it a professional appraiser’s opinion of a property’s worth. An appraisal informs what a buyer might expect to pay and what a lender is willing to lend for a property.

What Is Assessed And Appraised Value?

When considering a property’s assessed vs. appraised value, it helps to have a better sense of how these estimates work.

Assessed Value

Your home’s tax assessed value represents a yearly estimation of the property’s value. A government tax assessor will assign your property a valuation each year as a means through which to measure property taxes. Under this form of valuation, your home’s worth is left to the government to determine.

How It Works

When conducting a review here, your local tax authority will assign a tax-assessed value to your home in order to determine how much that you’ll owe in property taxes. As part of the process, the tax authority will have professional assessors review your property data and visit your home to determine your residence’s tax-assessed value.

These assessors are employed by local government bodies to research and assign fair, tax-assessed values for the property based on other properties in your area.

Assessors use several factors to determine this value, including historical property data, home inspection findings and comparative market analysis. They may also include the home’s appraised value, fair market value and any improvements made to the property.

Assessed values are often lower in amount that appraised values or true market values on a property. The tax-assessed value serves a distinct purpose: to help your local government determine how much you should be paying in taxes. These taxes go toward funding public works and services. Note that tax assessors may apply different standards to their work depending on where you reside.

Appraised Value

An appraised value represents an expert’s estimation of what your property is worth. It’s  an analysis of a property to determine a suitable sales price under current market conditions. A home appraisal is an independent and professional opinion of the fair market value of a property. This means that two home appraisers may arrive at different valuations.

How It Works

Before issuing a home loan, mortgage lenders order an appraisal. This appraisal ensures that the borrower isn’t borrowing more money than the home is worth. There are three main parts to an appraisal: An inspection of your property, a review of comparable sales in your area (comps) and the issuance of a final appraisal report.

An appraiser will analyze a property’s main characteristics like square footage and number of rooms. In addition, they’ll look at comps in the region to get a sense of what similar homes are selling for. Your appraiser may consider factors such as the home’s general state of repair and improvements made as well.

Then they’ll combine their research and will issue their findings in a formal report. This report will state the home's appraised value and list observations about the property. It will also note the calculations used to arrive at the number.

How An Appraisal Vs. Assessment Can Impact A Home’s Value 

Both a tax assessment and home appraisal can impact the value of a homeowner’s property as it pertains to the home’s ability to perform in the local real estate market. For example, if you’re assessed at a higher property valuation, it may increase the amount that an owner must pay in annual property taxes.

With appraisals, if your home appraisal comes up short of your requested mortgage amount, you may be required to personally cover any shortfalls out of pocket. The reverse is true too. If the house appraises higher, the seller may want you to pay extra or threaten to back out of the sale.

Tax Assessment Vs. Appraisal: Disputing The Different Valuations 

If you think your appraisal or assessment is wrong, you’re free to dispute the valuation.

Tax Assessment

Disputing a tax assessment requires contacting or filing a formal appeal with your local tax authority. You’ll want to keep records of any transactions or interactions relating to your property, and research comps in your area before reaching out.

Appraisal

On the one hand, you might go back to your appraiser armed with additional information and comps and seek to plead your case. They may listen or they may not. On the other, you might elect to pay a second or even third appraiser to offer another opinion.

Be aware that your mortgage lender needs to be involved. They may decide to go with the first appraisal if it’s not drastically off. Additional appraisals also require more time, which you may not have if you have a specific closing date to meet. Either way, working with an experienced real estate agent will help you through the process.

Assessed Vs. Appraised Value: The Main Differences

As noted throughout this article, there are key differences between assessed and appraised value. An assessed value is assigned by government tax assessors for purposes of determining annual property taxes. Conversely, an appraised value is a professional’s estimate of your home’s worth at market. Assessed values are often lower than appraised values.

Why Home Value Is Important

Your home’s value is critical for several reasons. It provides a sense of how much that you could make from the sale of your property. It also gives a better sense of how much home you might could afford when housing hunting.

Home valuations could hint at how much you can anticipate paying in property taxes each year. And they can affect whether you’ll be able to get a mortgage on a home you’ve bid on.

Additional Ways To Determine Your Home’s Value 

Looking for another opinion? Some simple offhand ways to get a sense of your property’s worth might also involve using various online home valuation tools or speaking with your local REALTOR®. You might also research and review comps for your area yourself.

The Bottom Line: Research Before Selling Or Buying A Home 

Your home’s tax-assessed value gives a sense of what your annual property tax payments might look like. On the flip side, an appraisal assigns a value to a home used by buyers, sellers and mortgage lenders. These valuations can fluctuate. It’s important to research a home’s value before selling or buying a property.

Buyers and sellers should look at recent home sales in the area before putting any offers on the table. If you’re considering buying or selling property in the near future, it helps to learn more about competitive market analysis.