Essential Concept
Understanding the difference between market value and assessed value is crucial for any property tax appeal. These two numbers often differ significantly—and that difference could save you thousands.
When it comes to property taxes, not all values are created equal. Two critical numbers determine your tax bill: market value and assessed value. Confusing these can cost you money or doom your appeal before it starts.
What Is Market Value?
Market Value Definition
Market value is the price your property would sell for in the current market, assuming a willing buyer and seller, adequate market exposure, and no undue pressure to buy or sell.
Think of market value as the "real world" price—what someone would actually pay for your home today. This value fluctuates with market conditions, recent sales, and buyer demand.
Factors That Determine Market Value
- Recent Comparable Sales: What similar homes have sold for recently
- Current Market Conditions: Supply, demand, and economic factors
- Property Condition: Age, updates, and maintenance level
- Location Factors: School districts, amenities, and neighborhood trends
- Unique Features: Upgrades, views, or special characteristics
What Is Assessed Value?
Assessed Value Definition
Assessed value is the dollar amount assigned to your property by the county assessor for tax purposes. This is the number used to calculate your property tax bill.
Assessed value is what the government thinks your property is worth for taxation. This value is supposed to reflect market value, but it's often outdated, inaccurate, or based on limited information.
How Assessed Value Is Determined
- Mass Appraisal: Assessors value thousands of properties using automated systems
- Property Data: Square footage, bedrooms, bathrooms from public records
- Sales Analysis: Comparison to recent sales (often outdated)
- Cost Approach: Replacement cost minus depreciation
- Assessment Ratios: Percentage of market value (varies by county)
Key Differences That Matter
Market Value
- • Updates in real-time with market conditions
- • Based on actual buyer behavior
- • Reflects true property condition
- • Considers unique features and upgrades
- • Influenced by current supply and demand
Assessed Value
- • Updated annually or less frequently
- • Based on mass appraisal systems
- • May not reflect actual condition
- • Often misses property defects
- • Can lag behind market changes
Why These Values Often Differ
Common Reasons for Discrepancies
- Timing Differences: Assessed values often lag 6-18 months behind market changes
- Data Errors: Incorrect property information in assessor records
- Market Volatility: Rapid price changes that assessments can't track
- Property Condition: Assessments may not reflect deterioration or improvements
- Assessment Ratios: Some counties assess at less than 100% of market value
Real-World Examples
Example 1: Falling Market
Market Value (2023)
$285,000
Market Value (2024)
$245,000
Assessed Value (2024)
$275,000
Result: Assessment is $30,000 higher than market value. Strong appeal case.
Example 2: Property Defects
Assessed Value
$320,000
Repair Costs
-$35,000
Adjusted Market Value
$285,000
Result: Major roof and HVAC issues justify $35,000 reduction.
How to Use This Knowledge in Your Appeal
Your Appeal Strategy
- Establish Market Value: Use recent comparable sales to determine what your property would actually sell for today
- Compare to Assessment: Calculate the difference between market value and assessed value
- Document the Gap: Show why your assessed value exceeds market value with solid evidence
- Present Professional Evidence: Use sales data, property condition reports, and expert analysis
- Request Fair Assessment: Ask for assessed value to be reduced to reflect true market value
Common Misconceptions
What NOT to Do
- ✗ Using Zillow/online estimates as market value evidence
- ✗ Assuming assessed value equals what you paid for the property
- ✗ Thinking market value is what you could sell for in a rush
- ✗ Using insurance replacement cost as market value
- ✗ Believing assessed value reflects current condition automatically
Professional Market Analysis
FairTaxer's AI platform automatically analyzes both market value and assessed value for your property, identifying discrepancies that could save you thousands in taxes.
The Bottom Line
Market value and assessed value serve different purposes, but for property tax appeals, the gap between them is your opportunity. When assessed value exceeds market value, you have grounds for an appeal.
Remember These Key Points:
- • Market value reflects current selling conditions
- • Assessed value is what you're taxed on
- • These values should be similar, but often aren't
- • Significant differences create appeal opportunities
- • Professional analysis increases your success chances
Understanding these values is the first step toward a successful property tax appeal. Don't leave money on the table—ensure your assessment reflects your property's true market value.