Market Value Vs. Assessed Value

A home's value is not a set number, it is based on what somebody will pay for it. These numbers move almost daily. There are usually two numbers to look at when buying or selling a home. There's the "assessed value", and the "market value", so let's learn the difference. 

These numbers seem identical, but they can be vastly different. The assessed value is usually lower and used in different ways.

Market value

The definition of market value is, "The most probable price that a given property will bring in an open market transaction." 

Essentially it's the price that a buyer will pay for the property, given the seller accepts that price.

A professional real estate agent is trying to determine a home's market value by looking at a couple of characteristics. 

External characteristics: these include the curb appeal, the outside condition of the home, style of home, size of the lot, and availability of public utilities.

Internal characteristics: The number and size of rooms, construction and appliance quality and condition, HVAC systems, and energy efficiency.

Comparable: what the homes nearby are selling for, or have already sold for.

Supply & demand: The number of buyers and sellers in your area.

Location: how desirable of a neighborhood this home is in, the quality of school districts, and the crime rate.

The market value of a home is a good place to begin for a plethora of things. Agents can use the market value to prod sellers to come up with a reasonable asking price for their home. A seller may give an unrealistic number they want for their home, but the agent is there to guide them towards the more realistic number. No number is right, nor wrong; The deciding number is ultimately what a buyer and seller are willing to agree upon.

Assessed value

To determine and understand the assessed value of a property, one must remember who is doing the assessing and why.

Municipalities, and most counties hire an assessor to value a home's worth to determine their property taxes. The assessor Looks at what the comparable sales are nearby, what the recent improvements will bring in value, the income you may be making from renting, and a couple other factors like the replacement cost of a disaster were to happen.

By the end, the assessor determines the value for your home. They then multiply that number by and assessment rate, which is a uniform percentage that each tax jurisdiction sets that is usually 80% - 90%. Four example, if you have a home that is market valued at $200,000 in your local assessment rate is 80%, the assessed value of your home is $160,000.

This number is now used by the local government to determine your property taxes. The higher the assessed value the more you'll pay in taxes.

What assessed and market values mean to you

A homes market value can rise and fall in days based on local conditions, the assessed value is a sturdier number. Some states put caps on how much the assessed value can rise within a year.

Don't worry if your assessed value isn't what you hoped, it's used mostly to determine your property taxes. When deciding if you are selling or buying your home the number you will mostly deal with is the market value.

Keep in mind the assessed the value is public knowledge which is in the property records. So when this number rises home sellers try to make the buyers aware to justify their desired price. Just remember at the end of the day, the home is only worth what the buyer is willing to pay for it.

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