Assessed Value vs Market Value

Market value is the most probable price your home would fetch in an open, arm's-length sale. Assessed value is the figure your county assessor records to calculate your property tax. The two are meant to track each other, but they often diverge — and when your assessed value sits above your true market value, you may be paying more tax than you owe.

Why the two numbers differ

Assessors set values in bulk through mass appraisal, often as of a fixed date and only updated on a reassessment cycle. Markets, by contrast, move continuously. So your assessed value can lag a falling market, reflect an outdated estimate, or carry errors in your home's recorded square footage, condition, or features. Some states also apply a fixed ratio or assessment cap, so the assessed value is deliberately a fraction of, or capped below, full market value.

A concrete example

Suppose your county assessed your home at $720,000 as of its valuation date. Over the following months, comparable homes in your neighborhood sell for figures that point to a true market value closer to $640,000. Your tax is still being calculated on the higher $720,000 — an $80,000 over-assessment. That gap, not the headline tax rate, is usually what a homeowner can actually challenge.

How it affects your tax and your appeal

Your tax bill is, roughly, your assessed value multiplied by the local effective tax rate. Lower the assessed value and the bill falls in proportion. An appeal doesn't argue the rate — it argues that your assessed value exceeds your market value, using comparable sales as proof. The closer your comps are to the assessor's valuation date, the stronger the case.

Most assessors aim to assess at or near market value; professional standards (the IAAO's ratio-study guidance) treat a median assessment-to-sale ratio between 0.90 and 1.10 as acceptable. If your home is assessed well above what comparable sales support, that's the over-assessment an appeal targets.

Related

• What is an over-assessment?
• How assessors value your home
• Comparable Sales (Comps)
• Effective Property Tax Rate
• Reassessment
• Run a free over-assessment check

Sources

• IAAO — General Assessment FAQs (assessed value as a function of market value): https://www.iaao.org/industry-data/general-assessment-faqs/
• IAAO — Standard on Ratio Studies (acceptable median assessment ratio 0.90–1.10): https://www.iaao.org/wp-content/uploads/StandardOnMassAppraisal.pdf