If you’ve ever wondered why your property’s assessed value doesn’t match what you think it could sell for, you’re not alone. Assessed value and market value are two different ways of looking at your home’s worth, and understanding the difference is key when buying or selling. Let’s break it down.
The assessed value is the value your municipality assigns to your property for tax purposes based on what they know about your property. Local governments use this value to calculate your annual property taxes.
What Is Assessed Value?
The assessed value is the value your municipality assigns to your property for tax purposes based on what they know about your property. Local governments use this value to calculate your annual property taxes.
How Is It Calculated?
Your local tax authority determines the assessed value based on several factors, including:
• The size of your lot and home.
• The property’s location.
• Improvements or upgrades you’ve made to the property (that they know about).
Keep in mind that assessed values are done without seeing the property and are typically only updated every one to three years, depending on where you live.
What Is Market Value?
Market value is the price your home would likely sell for in today’s real estate market. It’s determined by what buyers are willing to pay, not what the government thinks your property is worth.
How Is It Calculated?
Market value is influenced by:
• The current real estate market conditions (e.g., buyer’s or seller’s market).
• Recent sales of comparable properties.
• Your home’s unique features, like a renovated kitchen or a great view.
• The condition of your property compared to others on the market.
Unlike assessed value, market value is dynamic and can change quickly based on demand.
The Key Differences
1. Purpose: Assessed value is for tax purposes; market value is for buying and selling.
2. Frequency: Assessed value is updated periodically; market value can change from week to week.
3. Calculation: Assessed value is based on a formula used by the municipality; market value is based on what buyers are willing to pay.
Why Does the Difference Matter?
If you’re selling your home, market value is what really matters—it determines what buyers will pay. However, the assessed value can affect how potential buyers perceive your property, especially if they think the property taxes are too high.
Need Help Understanding Your Home’s Value?
Understanding assessed value and market value can feel overwhelming, but you don’t have to figure it out on your own. Whether you’re curious about what your own home would sell for or what it’s going to cost you to purchase, I’m here to help. Contact me today to get started!