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

Top 15 U.S. Cities Where Quality of Life Shines Bright in 2024–25

Discover the 15 U.S. cities leading in quality of life for 2024–25, as ranked by U.S. News & World Report. From affordability challenges to cultural gems and natural b… Read more

She-Elites Are Shaping the Future of Luxury Real Estate

Women are redefining the luxury real estate market, emerging as powerful decision-makers in high-end home buying and selling. Discover how this trend is transforming t… Read more

Shield Yourself: How to Spot and Avoid Real Estate Scams

Protect your investment! Learn how to identify red flags in real estate scams, from wire fraud to fake listings. Safeguard your hard-earned money with these expert tip… Read more

Winter Freeze: Real Estate Market Sees Sharpest Slowdown in Two Years

Discover the trends that froze the real estate market in December, as homes lingered on the market and inventory plunged. What does this mean for buyers and sellers he… Read more

California’s New Wildfire Insurance Rule: What It Means for Homeowners

California's new insurance regulation requires coverage in wildfire-prone areas but may result in significant cost increases for homeowners. Learn how this impacts hom… Read more

2025 and Beyond: Navigating the Turbulent Waters of Real Estate Antitrust Litigation

As real estate braces for 2025, antitrust litigation remains a key battleground. Learn about the appeals, buyer-side lawsuits, policy shifts, and DOJ scrutiny reshapin… Read more

Understanding Quitclaim Deeds: When and Why You Might Need One

Quitclaim deeds are a quick and efficient way to transfer property between family members or spouses without a sale. Learn what a quitclaim deed is, how to create one,… Read more

Unpacking the Surge in Existing-Home Sales Across the US

In November, existing-home sales reached a three-year high with a 6.1% annual increase, led by significant growth across three major U.S. regions. This blog explores t… Read more

Navigating the Rising Tide: Protecting Your Home in Insurance Deserts

Explore the challenges and solutions facing homeowners in areas known as "insurance deserts" where escalating premiums and climate risks make obtaining affordable cove… 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