Assessed Value vs. Appraised Value

A home has both an assessed value and an appraised value. Depending on the where the property is located, you may see a difference in the two values. That value difference could even differ by thousands of dollars. Why, you may ask? Tax assessed values are only used to calculate property tax determined by your county or municipality; a home’s appraised value represents the fair market value of the property.

Tax-Assessed Value

The tax-assessed value of a property is strictly for the purpose of calculating accurate property taxes. The county or municipality will use a different formula and criteria than a home appraisal to determine a fair taxable value of a property. Depending on the location of a home and the cost of the reassessment process, a home may only be reassessed every five to 10 years. Even after a home has been assessed, the actual figure for taxes owned may still be lower based on certain applicable tax exemptions. Tax exemptions may include discounts for a homestead property or homes owned by a wounded veterans, widows, or handicapped individuals.

Appraised Value

The appraised value of a home is considered the price of a home under fair market conditions. A home appraisal will evaluate a home and calculate an estimate of what a home is worth based on things like home condition, amenities, square footage, location, and comparable properties in the immediate area that have sold in the past year or two. Generally a home’s appraised value will be used by mortgage lenders when granting and approving mortgage loans and is far more detailed than the tax assessment review.

Keep in mind that if you purchased a home below fair market value due to a short sale or a family-based transaction, your tax assessment will still be based on the price under normal sales conditions.

The relationship between the tax assessed value and the appraised value will vary depending on which area of the country you live in. Depending on rules and regulations the appraised value of a home could far outweigh the assessed value of a home over time depending on renovations and home improvements and the timeframes in which tax authorities will re-assess a property.