Assessed value vs market value: Key differences

Updated July 31, 2025

Better
by Better

Townhomes that are assessed differently depending on their assessed value and market value.



What you'll learn

— What assessed value and market value mean
— Key differences between these two valuations
— How they affect your financial situation
— Factors that influence property assessments
— What to do if you disagree with your home's value

Property taxes hitting harder than expected? Your home's assessed value might be the culprit. Many homeowners discover these two key property valuations—assessed value and market value—can differ by tens of thousands of dollars, sometimes creating financial surprises.

Property taxes get calculated based on assessed value, while real estate transactions rely on market value. These valuations come from different sources: a government assessor establishes the assessed value, while market value reflects what buyers actually pay in today's market. Whether you're determining your home's worth, challenging your property tax bill, or negotiating a sale, understanding these two values helps you make smarter financial decisions.

The gap between these valuations can be significant. A home selling for $450,000 might carry an assessed value of only $320,000. This difference impacts everything from your annual tax bill to your refinancing options and equity calculations.

You'll discover what assessed value and market value mean, the key differences between them, how they affect your finances, and what factors influence these valuations. You'll also learn your options if you disagree with either assessment of your home's value.

What does assessed value mean?

Assessed value represents the dollar amount your local government assigns to your property specifically for calculating property taxes. Unlike market value, which reflects what buyers might pay, assessed value serves one primary purpose: determining your annual tax bill.

Your local tax assessor's office determines this figure through a systematic process that varies by jurisdiction. Most counties evaluate properties every 1-5 years, though some reassess annually. During assessment, officials examine various factors that impact home value, including:

— Property size and lot dimensions
— Home age and overall condition
— Number of bedrooms and bathrooms
— Square footage and layout
— Recent improvements or renovations
— Comparable properties in your neighborhood

Here's where it gets interesting: many jurisdictions don't assess properties at 100% of their estimated worth. Instead, they apply an "assessment rate" (sometimes called an equalization rate), which might be 80%, 90%, or another percentage of the property's estimated full value. This rate varies significantly by location.

Consider this example: a home with an estimated value of $400,000 in a county with an 80% assessment rate would have an assessed value of $320,000. Your property taxes would be calculated based on this lower figure—a built-in reduction that can save you thousands annually.

Assessed value often differs from the value determined during a home appraisal process for mortgage purposes. Your assessed value may lag behind rapid market changes since assessments occur periodically rather than continuously. While your home's market value might jump 15% in a hot market, your assessed value could remain unchanged until the next assessment cycle.

Planning to refinance your home? Lenders require an appraisal that produces an appraisal report rather than using the assessed value. This distinction becomes particularly significant when comparing mortgage rates or refinance rates, or when using a mortgage calculator or cash-out refinance calculator to estimate your costs.

What is market value in real estate?

Market value represents what your home would likely sell for under normal conditions in the current real estate market. Unlike assessed value, market value reflects what willing buyers would actually pay for your property based on current demand, comparable sales, and economic conditions.

Think of market value as the price tag the real estate market puts on your home right now. While assessed value stays relatively static, market value shifts constantly—sometimes daily—based on buyer interest, economic conditions, and local housing trends.

Several parties determine your home's market value:

— Real estate agents who conduct comparative market analyses to price listings competitively
— Professional appraisers hired by lenders during the home appraisal process to verify property worth
— Buyers and sellers negotiating based on perceived value and current market conditions
— Economic forces of supply and demand in your local housing market

Your home's market value depends on multiple factors:

— Location and neighborhood desirability
— Home size, condition, and age
— Recent upgrades or renovations
— Comparable sales in your area (often called "comps")
— Current interest rates and economic conditions
— Local market trends and inventory levels
— Factors that impact property value like school districts and amenities

Market value fluctuates constantly, responding to changes in the housing market. A home's market value today might differ significantly from its value six months ago or in the future.

When you apply for a mortgage or refinance, lenders require an appraisal to confirm the property's market value. This process results in an appraisal report that helps protect the lender from lending more than the property is worth. During a refinance appraisal, the appraiser evaluates your home's condition and compares it to similar properties.

Market value represents the most accurate reflection of what your home is truly worth in today's real estate market—not what a tax assessor determines for taxation purposes.

...in as little as 3 minutes – no credit impact

Assessed value vs. market value: Key differences

These two valuations serve completely different purposes and can create significant financial implications for homeowners. Understanding their distinctions helps you make smarter decisions about your property.

Purpose drives everything. Assessed value exists solely for property taxes—it's the number your local government uses to calculate your annual tax bill. Market value determines what buyers actually pay for your property in today's real estate climate.

Different players, different methods. Government tax assessors determine assessed value through standardized formulas, often applying an assessment rate below 100% of estimated property value. Market value emerges from buyers, sellers, and professional appraisers interacting in the open market.

Timing creates major gaps. Assessed values typically change every 1-5 years depending on your jurisdiction. Market value fluctuates continuously, responding to economic conditions, interest rates, and local housing trends.

Factor Assessed Value Market Value
Purpose Property tax calculation Real estate transactions
Method Mass appraisal techniques Individual home appraisal process
Frequency Every 1–5 years Changes continuously
Sensitivity Less responsive to improvements Reflects current condition
Documentation Tax assessment notice Appraisal report


Financial impact varies by value type. A lower assessed value benefits you through reduced property taxes, while a higher market value increases your equity and potential sale proceeds. This distinction becomes particularly important when comparing mortgage rates or refinance rates, or when considering a cash-out refinance.

Lenders care about market value only. During a refinance appraisal, lenders rely exclusively on market value—not assessed value—to determine loan eligibility. Your property taxes might be calculated on a $320,000 assessed value, but if your home's market value is $450,000, that's the number that matters for refinancing or home equity decisions.

The gap between these values can work for or against you depending on your goals. Lower assessed value saves money on taxes, but higher market value gives you more borrowing power and equity to work with.

How do they affect negotiations?

Assessed value and market value create distinct advantages during real estate negotiations, though smart buyers and sellers use them differently.

Sellers set listing prices based on market value, not assessed value. They analyze comparable sales, current market conditions, and unique features that impact their property value to price competitively. A seller who knows their home's true market worth negotiates with confidence and can justify their asking price to potential buyers.

Buyers often research assessed value before making offers. A significant gap between assessed value and asking price becomes a negotiation tool. A home listed at $450,000 with an assessed value of $350,000 gives buyers leverage—though they should recognize that assessed values typically lag behind current market conditions.

The home appraisal process often becomes the pivotal negotiation moment. Once an offer gets accepted, lenders require an appraisal to verify the property's worth before finalizing the mortgage. When the appraisal comes in below the agreed purchase price, this creates new negotiation opportunities:

Buyers can request a price reduction to match the appraised value. Sellers might demand that buyers cover the difference in cash. Both parties might compromise to save the deal.

Appraisal issues arise in approximately 20% of home purchases, making this dynamic particularly important for first-time homebuyers.

For homeowners considering refinancing, the relationship between assessed value and market value becomes crucial. During a refinance appraisal, lenders focus exclusively on current market value, which determines loan eligibility and terms.

The detailed appraisal report produced during this process provides valuable documentation that can help homeowners challenge property tax assessments if they believe their assessed value is too high relative to actual market conditions.

Homebuyers can use mortgage calculators to understand how different purchase prices affect monthly payments, while homeowners might use a cash-out refinance calculator to estimate how much equity they can access based on their home's current market value.

Successful negotiators understand how to use both mortgage rates and refinance rates alongside these different property valuations to achieve their financial goals.

What should you do if you disagree with your home's value?

Assessed value seems too high? Appraisal came in lower than expected? You have options to challenge both valuations when they don't reflect your property's true worth.

Challenging your assessed value requires a systematic approach:

— Review your assessment notice carefully, noting the deadline for appeals (typically 30-60 days)
— Research comparable properties in your neighborhood with similar characteristics
— Gather documentation of factors that might lower your property's value—needed repairs, outdated features, or market conditions
— Contact your local tax assessor's office to schedule an informal review
— File a formal appeal if the informal review doesn't resolve the issue

Keep in mind that assessments typically lag behind current market value, which could explain some discrepancies.

Challenging your market value from an appraisal follows different steps:

— Request a copy of your appraisal report and review it thoroughly for errors
— Identify overlooked factors that impact property value such as recent renovations or unique features
— Compile information about recent comparable sales that support your position
— Ask your lender about obtaining a second opinion through another home appraisal process

For refinancing purposes, lenders focus exclusively on current market conditions through a refinance appraisal, not your property's assessed value.

Before you appeal, consider the financial impact. A homeowner challenging a $400,000 assessed value might save $1,200 annually if successful in reducing it to $350,000 (assuming a 2.4% tax rate). However, appeals require substantial documentation and persistence.

Check current mortgage rates or refinance rates to determine if pursuing an appeal makes financial sense. You might also use a mortgage calculator to understand how different valuations affect monthly payments or a cash-out refinance calculator to assess potential equity access based on your home's corrected value.

Success requires preparation, documentation, and realistic expectations about the process timeline.

Factors that affect a home's assessment and market value

Several key factors influence both the assessed value and market value of your property, though they impact each valuation differently.

Location quality remains the most influential factor for both valuations. Properties in desirable neighborhoods with low crime rates, good school districts, and convenient access to amenities typically receive higher assessments and command higher prices on the open market.

Physical characteristics of your home substantially affect both values, including:

— Square footage and usable living space
— Number and size of bedrooms and bathrooms
— Overall condition and age of the property
— Quality of construction and materials used

The evaluation approaches create notable differences. Tax assessors typically focus on objective, measurable aspects of your property, often working from public records rather than physical inspections. The home appraisal process for market value includes subjective elements like curb appeal, interior design, and current trends.

Economic conditions profoundly affect market value but may take years to reflect in assessed values due to assessment cycles. During rapidly changing markets, the gap between these valuations can grow substantially.

Recent renovations present another key difference. While major structural improvements typically factor into both valuations, cosmetic upgrades often increase market value without necessarily affecting assessed value to the same degree.

During a refinance appraisal, appraisers evaluate these factors comprehensively, documenting findings in an appraisal report that lenders use to determine loan eligibility.

For homeowners, comparing current mortgage rates or refinance rates becomes particularly relevant when property values change significantly. Using a mortgage calculator or cash-out refinance calculator can help quantify how these valuation factors translate into financial opportunities or obligations.

To maximize both values, focus on maintaining your property's structural integrity and making strategic improvements that appeal to both tax assessors and potential buyers.

...in as little as 3 minutes – no credit impact

Assessed value vs. market value FAQs

Common questions about property valuations come up frequently. Here are the answers homeowners need most.

Is the assessment the same as an appraisal?

No, these are completely different processes. A property assessment comes from a government tax assessor for taxation purposes, while an appraisal is performed by a licensed professional appraiser to determine market value for mortgage lending, refinancing, or sales.

The methods differ significantly. Assessors evaluate properties in mass using standardized formulas and might not physically inspect your home. Appraisers conduct thorough individual inspections during the home appraisal process, examining specific features that impact property value.

The documents differ too. An assessment produces a tax valuation notice, while an appraisal creates a detailed appraisal report with property analysis.

Do market value and assessed value influence each other?

Yes, but indirectly. Market value doesn't consider assessed value in its calculation. However, rising or falling market values in a neighborhood eventually influence assessed values when reassessments occur.

During a refinance appraisal, appraisers focus exclusively on current market conditions without referring to assessed value. Tax assessors often use recent sales data (reflecting market value) when updating property assessments, creating a delayed influence.

What does assessed value mean on property taxes?

Assessed value serves as the foundation for your property tax bill. Your local government multiplies this value by the local tax rate (millage rate) to determine annual property taxes.

Many jurisdictions assess properties at a percentage of market value through an assessment rate. If your county uses an 80% assessment rate, a home with an estimated market value of $300,000 would have an assessed value of $240,000 for tax purposes.

Take control of your property valuations

Understanding the distinction between assessed value and market value puts you in control of your property's financial potential. These two valuations serve different purposes yet both significantly impact your financial situation.

Assessed value exists for taxation purposes, determined by local government assessors, and often falls below actual market worth. Market value reflects what buyers would genuinely pay for your home based on current conditions and factors that impact home property value. These differences become particularly important during real estate transactions, tax appeals, and refinancing decisions.

The timing of updates creates another key distinction. Assessed values typically change every few years, while market value fluctuates constantly with economic conditions. This gap can create both challenges and opportunities for savvy homeowners.

For homeowners who disagree with either valuation, documentation and persistence remain key to successful appeals. Before challenging an assessment or appraisal, weigh the potential benefits against the time investment required.

Remember that a lower assessed value benefits you through reduced property taxes, while a higher market value increases your equity and potential sale proceeds. Monitor both valuations to maximize your home's financial potential and make strategic decisions about one of your most valuable assets.

At Better Mortgage, we simplify the process of understanding your home's true market value. Whether you're refinancing, buying, or exploring your equity options, our digital tools and expert support help you act confidently on the most accurate data—backed by real-time market analysis, competitive mortgage rates, and a tech-driven experience that puts you in control.

...in as little as 3 minutes – no credit impact

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