Appraised vs. assessed home value: A full guide

Updated July 28, 2025

Better
by Better

Interior of an appraised home.



It’s easy to confuse a home appraisal with a home assessment. Even Realtors and loan officers may use these terms interchangeably sometimes.  

Assessed values and appraised values have their own unique jobs to do. Each one affects home buyers in a different way. 

Only the appraisal shows what a home is worth.

What is the assessed value of a house?

The assessed value of a home measures the home’s tax value. Most local governments assess the tax value of all homes and businesses in their jurisdiction. 

This assessed value becomes the basis for the home’s annual property tax bill. Homeowners with higher assessed values pay more property taxes even when everybody pays the same tax rate. 

For example, a 1 percent tax rate on a $400,000 home would cost $4,000 a year, adding about $334 to each month’s mortgage payment. The same 1 percent property tax rate on a home assessed at $300,000 will cost $3,000 a year, or $250 a month to the house payment.  

How do assessments work?

A local tax assessor or tax commissioner factors the home’s square footage, construction type, location, previous assessed values, and other property data. The tax assessor also considers changes in the local real estate market. These variables help assign a property’s tax value. 

Tax assessors may also check for building permits that show the homeowner recently added onto the home or improved the property in some other way. Some local taxing authorities send questionnaires to homeowners asking about changes that might affect an upcoming property assessment.

Most counties reassess home values every few years to keep tax digests up to date. This helps fund public services, schools, and other government services.

What is the appraised value of a home?

The appraised value of a home shows the home’s fair market value. This is the amount a seller can reasonably expect to charge for the property. An appraisal also helps buyers know how much to offer.

The home appraisal informs buyers and sellers, but it also has an essential job to do for the lender: Showing how much money the lender can lend for the home. 

A mortgage loan amount typically cannot exceed the appraised value of the property. If a home appraises at $400,000, for example, a lender won’t approve a $405,000 loan, even if the buyer and seller have agreed on that price.

A mortgage loan refinance also uses the appraised value to set the loan’s maximum size. For instance, a refinance loan that’s capped at 90 percent of the home’s value (90% LTV) can’t exceed 90 percent of the appraised value.  

How do appraisals work?

Licensed home appraisers issue home appraisals. The appraiser visits the home to measure its square footage, observe its location, and inspect its overall condition. The appraiser also factors in the sale prices for comparable homes, also known as comps, to gauge the local market.

Automated valuations have emerged as alternatives to human-generated appraisals. Automated appraisals offer immediate results, and they can give buyers and sellers a quick sense for a home’s appraised value. But their role in the loan process is in flux. Most mortgage lenders still order official home appraisals during the loan process.

Even when appraisals depend on humans holding tape measure, technology can still improve the experience for home buyers. For example, Better’s digital AI-powered engine helps keep buyers up to date about their home appraisal.

Appraised vs. assessed: Key differences

A home’s assessed value will often come in lower than its appraised value. One reason for this: the home’s property value could be several years old and still being used as a basis for levying local property taxes. 

Most homeowners like lower assessments because they keep property tax bills lower. 

But buyers shouldn’t confuse this assessed value with the home’s fair market value, which is the amount a seller can expect to earn from the sale and the amount the buyer can expect to pay. The home appraisal shows this fair market value.

Other key differences between appraisals and assessments include:

— Who regulates? State tax laws usually regulate property tax assessments. States have separate appraiser boards to regulate appraisals and license appraisers.

— Human vs computer? Since tax assessors may value thousands of properties at once, they rely more on computer valuations for support. For an official home appraisal, the appraiser visits the home and assigns a unique value.

— When they happen? Taxing authorities reassess property every year or every few years. Many states have laws to make sure property gets reassessed often enough. A home appraisal happens as part of a real estate transaction or when an owner wants a new valuation on the property. 

— How long do they last? A home’s tax assessed value stays in place until it’s replaced by a new assessment. A home appraisal usually has an expiration date, typically 120 days from the appraisal date.

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What if I disagree with an appraisal or an assessment?

Few homeowners will complain that their tax assessment is too low since a lower appraisal usually translates into lower taxes. But homeowners can, and often do, file appeals when they think their property has been assessed too high. 

A lower than expected home appraisal, on the other hand, can create a problem for home buyers and sellers. 

For example, if the buyer agreed to pay $400,000 but the home appraisal came in at $375,000, the mortgage loan process can’t move forward as it is. The buyer would have to put more money down to lower the loan size. Or the seller will need to agree to lower the purchase price.

Home appraisals can also be appealed. Buyers and sellers can ask the lender for a reconsideration of value (ROV). 

Appeals can be successful if there’s something new that the original appraiser didn’t know about the home. For example, if a similar sized house on the same block sold a few days ago for thousands more than its appraised value, the original appraiser may not have known about that sale yet. A reconsideration of value would be able to include it. 

How appraisals vs assessments affect home buying

Both home appraisals and home assessments affect borrowers in different ways:

How do assessments affect home buying?

Mortgage lenders will use the most recent tax assessment to determine how much the new homeowner will owe in property taxes. Annual property taxes will affect the estimated monthly payment shown on the summary page of the Loan Estimate. 

Why do property taxes affect monthly payments?

Because loan servicers add extra money onto each month’s mortgage payment. This extra money each month goes into an escrow account. Then the loan servicer uses the escrow account to pay property taxes on the home on behalf of the homeowner.

If annual property taxes cost $4,000 a year, the lender will add $334 to each month’s mortgage payment. If taxes cost $3,000 a year, the lender would need to add only $250 to the mortgage payment.  

How do appraisals affect home buying?

The home appraisal helps set the foundation for a new home loan on the property. The mortgage lender must know the market value before it can approve a loan to buy the home. 

The home’s market value must come in at or below the purchase price for the home for the loan process to continue. 

When a home’s market value comes in well below the loan size needed to buy the home, the loan will be less risky for the lender. This lowered risk could translate into slightly lower interest rates for some borrowers. 

Government-insured loans, like FHA and VA loans, have their own home appraisal process that includes a home inspection to make sure the home is safe and stable. 

How do appraisals affect refinancing?

Most mortgage refinances require a fresh home appraisal to determine the new loan’s maximum size. If the existing mortgage debt exceeds the fair market value shown by the appraisal, the home can’t be refinanced. 

Typical homeowners who have been making regular payments for several years won’t have this problem, but someone who just bought the home with a small down payment could face this dilemma, especially if home prices have been stagnant in the area. 

Home appraisals also set borrowing limits for second mortgages, including home equity lines of credit (HELOCs). 

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Other ways to determine a home value

Want to know a home’s fair market value without hiring a home appraiser? You could:

— Gather comps: Recent sale prices of comps, or comparable homes, can help show a home’s fair market value. If a similar sized home in the same neighborhood sold a month ago, that home’s price can show the ballpark value for other similar homes in the area. Comps are also part of an appraiser’s calculations. 

— Ask a Realtor: Local Realtors who know their area will have a sense for a home’s fair market value.

— Check automated valuation models (AVMs): Most online home listings already show an automated valuation. These values, generated by algorithms, provide a great starting point, but they’re not always the same as the official valuation. 

Finding these types of valuations can help home shoppers make more informed offers. They can also help a homeowner know how to price their property. 

But when the home goes under contract, the lender will hire an independent appraiser to assign the property’s official market value for use with the mortgage loan. 

Fair market value: A staple of mortgage borrowing

A home’s fair market value is one of the columns that holds up the mortgage loan needed to finance a property. The home’s market value, along with the buyer’s credit history, income level, and other debt obligations help lenders set interest rates and other borrowing terms.

Want to see how all these variables translate into your new monthly payment? You’ll need a mortgage pre-approval.

Better’s automated pre-approval process can take as few as three minutes, and it won’t pull a hard credit check or obligate the borrower to continue. Get started here!

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