Market Value vs Assessed Value: A Homeowner's Guide

Your home doesn't have just one value—it has several, depending on who's asking and why. The two most important are market value and assessed value, and they serve completely different purposes.

Understanding the difference helps you make smarter decisions about selling, refinancing, appealing your property taxes, and tapping your home equity.

Market Value Defined

Market value is what a buyer would actually pay for your home today in an open market transaction.

It's driven by supply and demand—what buyers are willing to pay based on:

• Recent sales of comparable homes
• Your home's location, size, and condition
• Current market conditions (interest rates, inventory, buyer demand)
• Unique features or drawbacks

Market value changes constantly. It rises in hot markets, falls in downturns, and fluctuates based on countless factors outside your control.

How Market Value Is Determined

There's no single "official" market value. Different methods produce different estimates:

• Comparative Market Analysis (CMA): What real estate agents use, based on recent comparable sales
• Professional appraisal: A licensed appraiser's formal opinion of value
• Online estimates (Zillow, Redfin): Algorithm-based estimates with varying accuracy
• Actual sale: The true market value is ultimately what someone pays for it

Assessed Value Defined

Assessed value is what your local government says your property is worth for the purpose of calculating property taxes.

It's set by your county or municipal tax assessor using standardized methods applied across all properties in the jurisdiction.

Key Characteristics

• Single purpose: Used only for property taxes
• Government-determined: Set by the assessor's office, not the market
• Updated on schedule: Reassessments happen annually or every few years, depending on your location
• May use assessment ratio: Often a percentage of market value, not the full amount

Why They're Different (And That's Normal)

Your market value and assessed value being different isn't a mistake—it's expected.

Assessment Ratios

Many states don't assess at 100% of market value. Instead, they use an "assessment ratio."

Example:

• Your home's market value: $500,000
• Your state's assessment ratio: 80%
• Your assessed value: $400,000

The assessed value is intentionally lower than market value. This is by design, not an error.

Assessment ratios vary widely:

• 100%: Some states (New York, Massachusetts) assess at full market value
• 10-20%: Some states (Louisiana, South Carolina) use very low ratios
• 40-80%: Most states fall somewhere in between

Timing Lag

Market values change daily. Assessed values update once a year (or less frequently).

If your market appreciated 10% since the last assessment, your assessed value doesn't reflect that gain yet. In hot markets, your assessed value may significantly trail actual market value.

Different Data

Appraisers visit your home, see your renovated kitchen, notice your new roof, and factor in condition. Assessors typically:

• Work from property records
• Use mass appraisal techniques
• May never see your interior
• Don't account for improvements unless you pulled permits

Two homes with identical records might have very different actual values based on condition—something assessments miss.

Real Example with Math

Let's walk through how these values work in practice:

Your home:

• Market value: $450,000 (based on recent comparable sales)
• State assessment ratio: 80%
• Assessed value: $360,000 (80% of market value)
• Local tax rate (mill rate): 25 mills (2.5%)

Property tax calculation: Assessed Value × Tax Rate = Annual Property Taxes $360,000 × 0.025 = $9,000/year

Notice that taxes are based on assessed value, not market value. If your area assessed at 100% of market value, your taxes would be: $450,000 × 0.025 = $11,250/year

The lower assessment ratio saves you $2,250 annually.

What Each Value Is Used For

Market Value Is Used For:

Selling your home: Listing price is based on market value Getting a mortgage: Lenders use appraised market value HELOC applications: Your credit line is based on market value Refinancing: Determines your loan-to-value ratio Insurance: Replacement cost coverage relates to value Estate planning: Determines estate value at death

Assessed Value Is Used For:

Property taxes: The only purpose Nothing else: Seriously, that's it

Lenders don't care about your assessed value. Buyers don't care. Insurance companies don't care. Only your local tax authority uses it.

How to Find Each Value

Finding Your Market Value

Online estimators:

• Zillow Zestimate
• Redfin Estimate
• Realtor.com

These are free but can be off by 5-15%. Use them as a starting point, not gospel.

Comparative Market Analysis (CMA): Ask a real estate agent for a CMA. They'll research recent comparable sales and provide a market value estimate. Usually free (the agent hopes you'll list with them).

Professional appraisal: For the most accurate value, hire a licensed appraiser ($400-$600). This is what lenders use and what you'd need for legal purposes.

Finding Your Assessed Value

Your property tax bill: Assessed value is listed on your annual tax bill

County assessor's website: Most counties have online property search tools where you can look up any property

Call the assessor's office: They can tell you your assessed value and explain how it was calculated

When Assessed Value Is Too High

If your assessment is higher than it should be, you're overpaying on property taxes. Common reasons for over-assessment:

• Incorrect property details: Wrong square footage, bedroom count, etc.
• Missed condition issues: Major problems the assessor doesn't know about
• Comparable homes assessed lower: Similar houses in your area have lower assessments
• Market decline: Values dropped but assessment hasn't caught up

How to Appeal

Most jurisdictions allow property tax appeals. The basic process:

1. Know the deadline: Usually 30-90 days after receiving your assessment notice
2. Gather evidence: Recent comparable sales, photos of property issues, corrected property details
3. File an appeal: Contact your assessor's office for forms and procedures
4. Attend a hearing: Present your case to an appeals board

Is it worth it? Calculate your potential savings:

• Assessment reduction sought: $50,000
• Tax rate: 2.5%
• Annual savings: $1,250

If a few hours of work saves you $1,250 per year (every year), it's often worth the effort.

For more details, see our property tax guide.

Frequently Asked Questions

Should my assessed value equal my market value?

Not necessarily. Many states intentionally assess below market value using assessment ratios. Check your state's policy. If your assessed value exceeds your market value, you may be overtaxed.

Does assessed value affect my home sale price?

No. Buyers don't care about your assessed value. They care about market value—what comparable homes are selling for. A low assessment doesn't mean you can't sell for a higher price.

Can assessed value be higher than market value?

Yes, though it's less common. This usually happens when:

• Markets declined after the assessment
• The assessor overvalued your property
• Your home has condition issues the assessor missed

If this is your situation, you have grounds for appeal.

Why did my assessed value go up when I didn't change anything?

Periodic reassessments adjust values to reflect market changes. If homes in your area appreciated, assessments rise accordingly—even without any changes to your property.

Does a higher assessed value help my HELOC application?

No. Lenders use their own appraisals or automated valuations, not tax assessments. Your assessed value has zero impact on your HELOC eligibility or credit limit.

How often is my property reassessed?

Varies by location:

• Some areas reassess annually
• Others every 2-5 years
• Some only when triggered (sale, permit, etc.)

Check with your local assessor's office.

The Bottom Line

Market value and assessed value are related but serve different purposes:

• Market value = What buyers would pay. Used for selling, buying, mortgages, HELOCs.
• Assessed value = What the government says for taxes. Used only for property taxes.

Don't expect them to match. The assessed value is often intentionally lower due to assessment ratios and timing lags.

Focus on market value for financial decisions. Only worry about assessed value if it seems too high—then consider an appeal to lower your property taxes.

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Your market value determines your home equity options. See what you qualify for with a HELOC.