Almost anything you own is considered an asset, and what the asset is worth largely depends on how the asset is valued. There are a variety of methodologies that professionals use when performing a valuation, and each methodology has a different use and purpose. While assessed value and fair market values sound similar, each methodology can produce a different valuation for the same asset.
When your local tax assessor places a value on your property for the purposes of taxation, the value that she uses is the assessed value. Each state or county has its own laws pertaining to how the assessed value of property is calculated. Usually, when a property's assessed value rises, so do the taxes on the property. Some counties have mandatory reassessments that take place over a certain period of time, while others don't perform an assessment until the property is sold.
Fair Cash Value
The fair cash value, or fair market value, of an asset is very different than the assessed value. If you decide to sell an asset, what it gets on the open market is the fair market value. These include conditions such as the sale must occur between two willing and informed parties. There are often differences of opinion between real estate brokers and appraisers on what constitutes fair market value. Real estate brokers believe that fair market value is the highest price that's agreed upon, while appraisers believe it's the price most likely to be agreed upon.
Homeowners are usually well-versed in the differences between the assessed and fair market values of their homes. A homeowner may use the fair market value when attempting to secure a home equity loan, for example. The bank will verify that homeowner's valuation with an appraisal, which attempts to predict what the home would sell for on the open market. If the proceeds of the new loan are used to improve the home, then the county may send the assessor along to reassess the property -- and subsequently raise the taxes on it.
Fighting Your Assessment
There's little you can do about your property's fair market value, other than to wait for a buyer to come along who's willing to pay what you think is the property's fair market value. Your assessment, on the other hand, is another matter. Counties usually have a period of time during the year when property owners can petition the tax assessor if they believe the assessed value -- and the property taxes -- are too high. Be forewarned, however; if this approach backfires, you can wind up owing more in taxes.
Lisa Bigelow is an independent writer with prior professional experience in the finance and fitness industries. She also writes a well-regarded political commentary column published in Fairfield, New Haven and Westchester counties in the New York City metro area.