Market Value: Market value refers to the estimated price at which a property would sell in the current real estate market. It is determined by various factors, including the property's location, size, condition, amenities, and recent sales of comparable properties in the area. Market value can fluctuate over time due to changes in market conditions, property improvements, or other external factors.
Assessed Value: Assessed value, on the other hand, is the value assigned to a property by the local tax assessor's office for the purpose of calculating property taxes. It is usually a percentage of the property's market value. The assessed value is used to determine the amount of property tax you owe to your local taxing authority.
Key Differences:
- 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: Market value is determined by real estate professionals, appraisers, or through comparative market analysis. Assessed value, however, is determined by the local tax assessor's office based on their assessment methods and guidelines.
- Fluctuation: Market value can change frequently due to market conditions, property improvements, or other factors. Assessed value, on the other hand, is typically reassessed periodically, usually annually or every few years, and may not always reflect the current market value.
- Tax Calculation: Property taxes are based on the assessed value of your property, not the market value. The tax rate is applied to the assessed value to determine your property tax bill. Therefore, even if the market value of your property increases, your assessed value and subsequent tax bill may not increase at the same rate.
Why Understanding the Difference Matters: Understanding the distinction between market value and assessed value is crucial when it comes to property taxes. By having a clear understanding of these terms, you can better evaluate the fairness of your property tax assessment. If you believe that your assessed value is higher than it should be, you may have grounds for a property tax appeal to potentially reduce your tax bill.
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