Home Tax Assessed Value Vs. Appraised Value

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Residential real estate varies in value according to real estate market conditions. When market conditions change, property owners should become more aware of the relationship between a property's appraised value and its assessed value. This relationship is even more critical when real estate market values drop.

Appraised Value

There are a variety of "appraised values," including insurance value and replacement value. In the vast majority of home sales, the appraised value is the same as the market value. Appraised values have defined methodologies and, when used for home loans, appraised values are subject to federal regulations.

Market Value

When the appraised value is based on current real estate market conditions, the appraised value is also called market value. The market value takes into account the retail price of a home as of a given date. Residential real estate appraisals for most loan purposes and real estate transactions look for the appraised value to reflect market value of the home.

Assessed Value

Assessed value is a value assigned to a property as a basis for taxation. Assessed value can be related to the appraised value based on market conditions at the time of valuation. However, the analysis of actual market conditions may not be used, making the assessed value highly subjective. There is no one agreed upon method for determining assessed value. Additionally, an assessed valuation that may reflect market conditions in the past is rarely analyzed again in a timely manner.

Assessed Value vs. Appriased Value

Unlike appraised values, which can vary with real estate market conditions, the assessed value often does not change with market conditions. It is quite rare for an assessed value to equal an appraised value based on market conditions. In fact, the only time the two values are most nearly equal is the date a property is sold and the transaction recorded. After that time the two values are different, with appraised value generally being greater than assessed value. Most important for a homeowner, assessed values do not decline with the appraised values in a weaker real estate market.

Assessed Value Appeals

When the real estate market is especially weak, the assessed valuation can be greater than the appraised value. At this point, the homeowner is paying more in property tax than necessary. Instead of paying the inappropriate amount of taxes, a homeowner can appeal the assessed value of the home because it is not reflecting the lower market values. The procedure for the appeal varies with local jurisdiction but usually involves the homeowner collecting current market data and presenting a case for a lower assessed valuation.

References

  • "The Appraisal of Real Estate: 10th Edition"; Stephanie Shea-Joyce, Editor; 1992

About the Author

Kathleen Buczko began writing professionally in 1986 for publications such as "The News-Observer Newspapers," "MicroTimes" and "DVD Magazine." She began her career as a broadcast journalist at WDIV-TV. Buczko has a Bachelor of Arts in communications from Wayne State University.

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