Understanding Tax-Assessed Value vs. Market Value

Lisa Mailhot  |  December 13, 2024

Buyers

Understanding Tax-Assessed Value vs. Market Value

 

Home prices are dynamic, changing based on a variety of factors, making the real estate market a thrilling (or sometimes frustrating) field. As a buyer or seller, understanding the distinction between tax-assessed value and market value is crucial in leveraging these figures to your advantage.

Market Value: Decoding the Basics

Market value is defined as the most likely price a property will fetch in a fair, open market transaction. In simpler terms, it's the price a willing buyer pays and a seller accepts. Real estate professionals assess this value by examining:

  • External Characteristics: Includes curb appeal, exterior condition, lot size, home style, and public utility access.
  • Internal Characteristics: Focuses on the interior like room size and count, construction quality, appliance conditions, heating systems, and energy efficiency.
  • Comparables: Prices of recently sold similar homes in the area.
  • Supply and Demand: The balance between the number of buyers and sellers.
  • Location: Neighborhood desirability, school quality, and crime rates.

These factors help real estate agents establish a property's market value, guiding sellers in setting asking prices and aiding buyers in making competitive offers.

Understanding Assessed Value

Assessed value is primarily used for property tax purposes, calculated by municipal assessors. They consider sales of comparable properties, any income from the property, and costs to replace the home if lost to disasters. This assessed value, minus any applicable tax exemptions, is then multiplied by the assessment ratio (typically 80%-90%) to determine the taxable value.

For example, if a home’s market value is $200,000 and the assessment rate is 80%, the taxable value becomes $160,000, which is used to calculate property taxes.

Assessed vs. Market Values: Implications for Property Owners

Though market values can fluctuate dramatically, assessed values tend to change less drastically, with some states capping annual increases. A lower assessed value benefits homeowners by reducing the property tax burden, while a higher market value can improve a home's resale value.

Sellers might highlight a home’s high assessed value to justify their asking price, whereas buyers might reference a lower assessed value to negotiate a lower purchase price. Ultimately, the critical number is the agreed-upon sale price between buyer and seller.

Bottomline

Whether tax-assessed or market value, the true worth of a property is what parties agree upon in a sale. If you're looking to make a move in Orange County and want to navigate these values proficiently, let's connect and find your perfect home or get the best deal on your property.

 

 

Reference: Kaplan Gordon, Lisa. "Tax Assessed Value vs. Market Value: What’s the Difference?" December 10, 2024.

RECENT BLOG POSTS

Buyers Set the Pace But Are Sellers Keeping Up?

Southern California’s housing market is cooling in mid-2025, with rising inventory and more price cuts across Newport Beach and Orange County. Buyers are gaining contr… Read more

From Corona to San Clemente: Navigating the Southern California Real Estate Market in Q2 2025

Explore the Southern California real estate market in Q2 2025 with insights on inventory trends, price changes, and buyer behavior in cities like Corona, Costa Mesa, D… Read more

Mortgage Rates Drop, Boosting Homebuyers' Purchasing Power

As mortgage rates drop to their lowest level in months, homebuyers are gaining more purchasing power. Discover how this shift is benefiting house hunters and what it m… Read more

California Eases Building Rules to Tackle Housing Crisis

California is tackling its housing crisis by rolling back the California Environmental Quality Act (CEQA), long criticized for stalling new developments. This game-cha… Read more

Understanding Current Housing Market Trends

The housing market is experiencing some noticeable changes, from fewer new listings to a drop in buyer activity. In this blog, we dive into the latest market shifts, w… Read more

US Median Home Prices Hit Record High

The median sales price of a U.S. home has surged to a record high of $396,500, but with more homes on the market, buyers are in a stronger position to negotiate. Learn… Read more

Mortgage Applications Rise Slightly After Recent Decline

Mortgage applications have increased by 1.1% following a decline the previous week, signaling some shifts in the housing market. In this blog, we explore the latest mo… Read more

Longtime Homeowner? This Hidden Tax Could Cost You Thousands

Many longtime homeowners in Orange County are sitting on a hidden tax burden due to outdated capital gains rules that haven’t changed since 1997. Learn how this overlo… Read more

Home Prices Slow as Buyers Gain Power

May 2025 saw home prices at seasonal highs, but growth has nearly stalled as market dynamics shift. With more listings than buyers, slower sales, and increased negotia… Read more

We are excited to assist you in finding your perfect home

Let's find a time that suits you best to chat about your goals, show you how we work, and figure out how we can help you the most