What Is The Top Difference Between Market Value & Assessed Value?

As the top Arizona cash home buyer, I want to help you make sure you understand potentially confusing real estate terms. These two values play a significant role in determining property taxes and making informed buying and selling decisions. Below are attempts to demystify this topic so you can make better selling decisions for your family.

What is Assessed Value?

Assessed value refers to the dollar amount assigned to a property by a local tax assessor to determine property taxes. This value is typically based on a percentage of the property’s fair market value, adjusted according to local tax laws and regulations.

How is assessed value determined?

Assessors use various methods to determine a property’s assessed value. These methods may include:

1. Comparing the property to similar properties in the area that have recently sold.
2. Evaluating the property’s physical attributes, such as size, age, and condition.
3. Analyzing the property’s income potential, if it’s an income-producing property like a rental unit.

The Purpose of Assessments

The primary purpose of an assessed value is to calculate property taxes. Local governments use the assessed value to determine the tax rate for each property. Doing this ensures a fair distribution of the tax burden among property owners.

 

Pros and Cons of Assessed Value

Pros:

1. Provides a consistent basis for calculating property taxes.
2. Ensures fairness in tax distribution among property owners.

Cons:

1. It may not accurately reflect the current market value.
2. Local tax laws and regulations can influence it.

 

Understanding Market Value

 

What is Market Value?

Market value is the estimated amount a property could sell for if listed on the MLS. This value is influenced by factors such as location, property condition, and current market trends.

Factors Influencing Market Value

Some key factors that influence market value include:

1. Supply and demand in the local market.
2. The property’s location and neighborhood amenities.
3. The age, size, and condition of the property.
4. Economic factors, such as interest rates and employment rates.

Pros and Cons of Market Value

Pros:

1. Reflects the current market conditions.
2. Provides a more accurate representation of a property’s actual value.

Cons:

1. Market fluctuations can influence it.
2. It may be different from the assessed value.

 

Key Differences between Assessed Value and Market Value

 

Purpose

The assessed value is primarily used for calculating property taxes, while market value is used to determine the potential selling price of a property in the current market.

Calculation Method

The assessed value is determined by the local tax assessor using specific methods, including comparing similar properties, evaluating physical attributes, and analyzing income potential. Market value is estimated based on supply and demand, location, property condition, and economic factors.

Timing and Frequency

Assessed values are typically updated periodically, usually annually or biennially, depending on local regulations. Market value, on the other hand, can frequently change as market conditions fluctuate.

Stability

Assessed values are generally more stable than market values because market fluctuations influence them less. Market values can be volatile due to changes in supply and demand, economic factors, and other external influences.

 

How These Values Affect Homeowners

 

Property Taxes

Assessed values are used to calculate property taxes. Homeowners with higher assessed values will generally pay higher property taxes. Understanding the assessed value of your property can help you budget for your property tax bill and appeal if you believe your assessed value is too high.

Selling and Buying Decisions

Market value is significant when making decisions about buying or selling a property. Buyers want to ensure they are not overpaying for a property, while sellers want a fair price. Knowing the market value can help both parties negotiate and make informed decisions.

While assessed value is important for calculating property taxes, market value is a key factor when buying or selling a house.

 

Still Not Sure?

 

Is assessed value always lower than market value? Not necessarily. Assessed values can sometimes be higher or lower than market values, depending on local tax regulations and market conditions.

Can I appeal my property’s assessed value? Yes, most jurisdictions allow homeowners to appeal their property’s assessed value if they believe it is too high. Check with your local tax assessor’s office for specific procedures and deadlines.

Does remodeling my home affect its assessed value? Significant improvements or renovations can increase your home’s assessed value, which may result in higher property taxes.

How can I find out my property’s market value? To get an accurate estimate of your property’s market value, consult a real estate professional, such as a real estate agent, Realtor, or cash home buyer like Andrew The Homebuyer.

Is the appraised value the same as the market value of my property? The appraised value is an estimation of a property’s value by a licensed appraiser, often for lending purposes. While appraised values are typically close to market values, they may differ due to different evaluation criteria and methodologies.

 

Check out the Andrew The Homebuyer home value estimator article to learn more about your property’s cash worth. Request a fast, free, no-obligation cash offer to buy your Arizona home, house, property, or land fast for cash today!