What is my home worth?
Most people realize the answer to this question depends on who you ask. But did you know every home has two distinct values attached to it—and that they’re usually quite different?
Both of these values—the market value and the assessed value—arise when buying or selling a home, so it’s important to understand the differences:
Market value is an appraiser or real estate professional’s opinion of your home’s sale price based on current market conditions.
Assessed value is the value a local tax assessor assigns to a property for the purpose of calculating property taxes.
Learn about assessed value vs. market value below so you can make more informed decisions the next time you need to make a move.
What is the Market Value of a Property?
Market value (or “fair market value”) is the estimated price buyers would pay for a property in the current real estate market. A variety of factors influence your home’s market value, such as:
The property’s location: Homes by the beach, in the middle of a bustling city, and in desirable neighborhoods (usually those with good schools) command higher prices. Neighborhood location matters, too, such as proximity to entertainment venues or restaurants, public parks, shopping areas, and more.
Property size: Buyers cite “more space” as one of the most common reasons for wanting a new home. In general, the more “livable” space a home has, the greater its property value is. For instance, attics, for instance, don’t count toward square footage. The size of the lot itself is also an important factor.
Condition: Homes needing little maintenance upon move-in will have higher market values than those that need a lot of work. Aspects to consider include a home’s plumbing, electrical systems, foundation work, roof, and their current conditions.
Amenities and features: Indoor or outdoor pools, home offices, open floor plans, modern appliances, children’s play areas, nearby walking trails, and more enhance a home’s comfort and drive up its value. These features may be indoor or outdoor and on-site or nearby in terms of location.
Recent sales of comparable properties: “Comps,” as they’re called, are homes that have been listed or sold within the last six months in the same neighborhood. They’re similar to your home in square footage, number of bedrooms and bathrooms, garage space, lot size, and age of the home.
Market value can change frequently due to market trends or property improvements. For example, the real estate market continues to be strong in Sun Belt cities and states thanks to abundant job opportunities and a high quality of life. Properties also experience changes in market value when improvements are made or if neglect leads to deterioration over time.
How Market Value Is Determined
Usually, a real estate agent or broker prepares a comparative market analysis report to determine a property's market value.
Agents or real estate firms gather data on your home (year built, location details, tax bill, lot acreage, sale history, etc.). Then, they look for four to six similar homes and compare your property against them. The agent will consider:
All the positive and negative aspects of your home
Compare these aspects with comps in the area like time on market to arrive at an estimated market value they believe is accurate.
What is a Property’s Assessed Value?
Your home’s assessed value is the valuation the local tax assessor assigns for property tax purposes.
Assessed value, or taxable value, is usually a percentage of the property's market value—typically 70-90%, depending on the local tax rate. Some communities assess at 100% of market value, which means the assessed value equals the market value.
Your home’s assessed value directly impacts your property tax bill. That’s why, as a property owner, it’s essential to ensure this figure is accurate.
Example:
Rochester, New York, taxes homes at 100% of their market value.
For a home with a market value of $500,000, its assessed value is $500,000.Nearby Henrietta, New York, taxes homes at 92% of their market value.
For a home with a market value of $500,000, the municipality taxes 92% of that amount, so its assessed value is $460,000.
If the tax rate were the same in both jurisdictions, the Henrietta home’s lower assessed value would produce a lower property tax bill.
How to Determine a Property’s Assessed Value
Tax assessors use different methods to determine the assessed value of a property.
Sometimes they visit your property to evaluate the condition of your home. They often note any recent damages or structural improvements—such as an in-ground pool, a home addition, a finished basement, or a new deck, for instance. They also note the condition of your neighborhood and its amenities. Assessors may also consider the sale prices of comparable properties in your area.
Other jurisdictions use statistical models and sophisticated data analytics programs to mass appraise large groups of homes more quickly. However, these mass appraisals can be less accurate because assessors usually don’t visit homes individually and, therefore, can’t factor in a home’s individual characteristics that may impact value.
Local assessors update home values annually or every few years, depending on the jurisdiction’s assessment process.
Key Differences Between Market Value and Assessed Value
There are four important differences that distinguish market value and assessed value:
Purpose:
Market value is used in real estate transactions, such as buying or selling a property.
Assessed value, on the other hand, is used solely for tax assessment purposes.
Determination:
Real estate professionals or appraisers usually do a comparative market analysis to determine market value.
Local tax assessors use their jurisdiction’s own assessment methods and guidelines to determine assessed value.
Frequency of change:
Market value can change frequently due to market conditions, property improvements, or other factors.
Assessed value, on the other hand, changes only periodically, usually annually or every few years, and may not always reflect the current market value.
Impact on taxes:
- Property taxes are based on the assessed value of your property, not the market value. Local governments apply the tax rate to the assessed value to determine your property tax bill.
Therefore, even if your property's market value increases, your assessed value and subsequent tax bill may not increase at the same rate.
How Assessed Value Affects Property Taxes
Your home’s assessed value directly impacts your property tax amount. The calculation for determining property tax is:
(your home’s assessed value) ✕ (your area’s property tax rate)
The higher your home’s assessed value, the higher your property taxes will be. For instance, compare the property taxes of the two Monroe, Georgia, homes below, a locality that has a tax rate of 0.86%:
As you can see, assessed value has a significant impact on property taxes, along with the tax rate in the area where you live or own property.
That’s why it’s important to evaluate your home’s assessed value whenever a new property tax bill arrives. If you disagree with the assessor’s evaluation, you can try to change it! Most assessors do their best to generate fair assessments, but they sometimes make mistakes.
All municipalities have a process in place for homeowners who want to protest their property’s assessment. You’ll need to gather data and documentation that supports your case, and you may need to present it to a tax board. Or you can simply ask Ownwell to handle everything for you! If you win your case, you’ll not only be lowering your tax bill this year but also lowering the baseline for future tax years.
The Impact of Market Value on Buying and Selling Property
If you’re buying or selling a home, having a good understanding of market value will help you make more informed decisions.
Sellers need to price their property correctly when it goes on the market. An accurate asking price can help it sell faster. If buyers perceive a home is priced fairly, it boosts their confidence around a potential purchase and encourages an offer.
As a buyer, understanding a home’s market value will help you make competitive offers. The more you know about the local market and the home itself, the better your chance of crafting an acceptable offer. Bidding much lower than market value could undercut your chances of getting a home you love.
Plus, as shown above, market value affects your property’s assessed value, which impacts your future tax bills.
How Ownwell Can Help You Ensure Fair Property Taxes
Ownwell’s property tax appeal service can help you keep those future tax bills in check.
Our team of experts can perform a comparative market analysis to determine the accuracy of your home’s valuation. If your property has been overassessed (it happens more often than you think!), we’ll work to protest the amount and pursue a reduction.
Our experienced team knows exactly what data to collect and present to win a protest. Plus, we have relationships with local assessors and can help shepherd your case smoothly through the system.
We win 86% of the cases we bring, saving our customers an average of $1,148 on their property tax bills.
Even better, you don’t pay unless we win!
Have Confidence In Your Property’s Valuations
Understanding the difference between market value vs. assessed value is key to not only conducting successful real estate transactions but also paying the correct amount of property tax. Remember, none of this is an exact science—there’s always some degree of subjectivity to valuations. So if you’d like to verify the accuracy of your property’s assessed value—or get assistance with a property tax protest—reach out to us at Ownwell. We’d love to help!
