What’s the Difference Between Your Home’s Market and Your Home’s Assessed Value?
Being aware of your home’s value is helpful with knowing your net worth, and getting an idea of how much property tax you’re to pay the local and state government every year, among other important reasons. But how do you determine how much your home is worth?
And what’s the difference between ‘market value’ and ‘assessed value’?
Market value is the estimated amount active buyers would currently be willing to pay for your home. Your home’s market value is determined by an appraiser, who is typically hired when your lender is deciding how much money to provide in a loan or you are setting the list price when putting your home on the market.
“When people think about home values, they often mean, ‘This is the price that I could sell it for if I were to sell it today,’ or ‘This is the way a bank would value it if I were to go talk to the bank about getting a home equity loan or maybe refinancing my mortgage,” says Danielle Hale, Chief Economist for Realtor.com.
Professional appraisers are an instrumental part of being able to examine a property, nearby recent sales and the factors that may add to or detract from interest in a property, and then assigning a value to the house based on the information. An appraisal typically costs between $300 and $400, according to Angie’s List, and is paid by the homeowner for personal use and the buyer for a lender-required appraisal.
Assessed value is used for the sake of calculating how much you owe in property taxes, the assessed value is also based on laws of your state, county and even city, explains Margie Cusack, research manager for the International Association of Assessing Officers.
Because of the specificity of assessed value to your exact location, Cusack recommends all homeowners – as well as homebuyers who don’t yet pay property taxes – become well-versed in the statutes that apply to the area, how the assessment is calculated and where your property taxes go. “You really need to read your assessment notice,” she says. “Usually that will define what assessed value means for that property.” Many assessors’ offices keep online databases open to the public that allow you to access information on the history of your property – including the deed from previous sales – and information that factors into the assessment of your property.
What if you Disagree with your Home’s Value?
A couple of things to do:
- A homeowner or a buyer may be able to request a property be appraised a second time with new information the appraiser may not have been aware of before – a finished basement, for instance, can change the value of a home if it can be counted in the square footage. An appraiser may be willing to take a second look at the property without extra charge if something was missed, but you may also need to pay for another complete appraisal to have your house fully reevaluated.
- For assessed value, the process for petitioning a reassessment varies widely between states and counties, so it’s best to explore your local assessor’s office website for information on discussing the matter.