Assessed Value vs. Market Value Explained: What is My Home Actually Worth?

When you own or are buying a home, you’ll encounter assessed value and market value. While they both measure what your home is worth, they’re used for very different purposes. 

Assessed value: The value your local government assigns to your home for tax purposes.

Market value: The price a buyer would realistically pay for your home in the current real estate market.

This Redfin real estate article dives deeper into the differences between assessed value vs. market value, helping you understand how each is determined, why they matter, and how they impact your finances.

What is assessed value?

The assessed value, also known as tax-assessed value, is the official value your local government assigns to your property for tax purposes. It’s not what you could sell your home for today – it’s a value used primarily to calculate your property tax bill.

County or municipal tax assessors calculate this value using a combination of property details and market data. Factors often include:

• Lot size and square footage
• Home type (single-family, condo, multi-family, etc.)
• Age and condition of the home
• Location and neighborhood desirability
• Recent renovations or improvements
• Comparable home sales in the area

Most jurisdictions apply an assessment ratio (a percentage of the home’s market value) to determine the assessed value. For example, if your home’s market value is $250,000 and your county uses a 60% ratio, your assessed value would be $150,000.

This number is used to calculate your property tax bill. Your tax rate, often called a mill rate or levy rate, is then applied to the assessed value. Because assessments are tied to taxes – not necessarily the real estate market – assessed value is often significantly lower than market value.

Example: If your assessed value is $150,000 and your county’s tax rate is 1.2%, your annual property tax bill would be $1,800.

What is market value?

The current market value of a home is the price it would sell for in today’s real estate market. Unlike assessed value, this figure is shaped by what buyers are willing to pay rather than a tax assessment.

Market value is shaped by several key factors:

• Comparable sales (“comps“): Recent sales of similar homes in your neighborhood.
• Housing demand: Competition among buyers and the number of homes available.
• Property features: Size, layout, upgrades, curb appeal, and amenities.
• Economic conditions: Mortgage interest rates, inflation, and employment trends.
• Timing: Seasonal market shifts or broader economic cycles.

Real estate agents, appraisers, and buyers use market value to guide pricing and negotiations. Because it captures what buyers are willing to pay, your home’s current market value may differ widely from its tax-assessed value.

Key differences between assessed value vs. market value

Why the difference between market value and tax-assessed value matters

Whether you’re paying property taxes, selling your home, refinancing, or appealing an assessment, each situation depends on a different value.

For sellers: Market value determines your sale price

• Buyers and real estate agents ignore assessed value when making offers.
• Your home’s selling price depends on market value, based on recent sales of similar homes.

For homeowners: Property taxes are based on assessed value

• Your assessed value determines your property taxes, not your home’s market value.
• Even if home prices in your area rise, your property taxes won’t increase immediately because assessed values are updated periodically and are typically lower than market value.

For refinancing or taking out a HELOC: Market value matters

• Lenders base refinance terms and home equity loans on market value, not assessed value.
• A higher market value means more home equity, which can help you qualify for better loan options.

For appealing property taxes: Focus on assessed value

• If your property tax bill seems too high, you can challenge the assessed value.
• Providing evidence that similar homes are assessed for less, or that your assessment is outdated, could lower your property taxes.

FAQs

How can I determine the current market value of my home?

There are several ways to estimate what your home could sell for in today’s market:

• Online home valuation tools: The Redfin Estimate provides a free and instant estimate of how much your home is worth based on various data points, such as market conditions, your home’s features, location, etc.
• Comparable market analysis (CMA): A real estate agent can create a report comparing your home to similar recently sold properties to estimate a realistic selling price.
• Home appraisal: A licensed appraiser conducts a detailed evaluation of your home’s condition, features, and comparable sales, providing an official value often required for mortgages or refinancing.

Using one or more of these methods gives you a clear picture of your home’s current market value and helps guide decisions about selling, refinancing, or leveraging home equity.

What is appraisal value, and how is it different from market value?

An appraisal value is determined by a licensed appraiser, often during the mortgage process. While market value reflects what buyers are willing to pay in the current market, an appraisal provides a professional opinion of value based on the home’s condition, location, and comparable sales. Lenders rely on appraisal value to ensure they’re not financing more than a home is worth.

Why is my tax assessed value lower than my home’s market value?

Local governments often set assessed values below full market value to stabilize tax bills and avoid sharp annual increases. This benefits homeowners by keeping property taxes more predictable, even when home prices rise quickly.

Can you appeal your assessed value?

Yes. Homeowners can challenge their property’s assessed value if they believe it’s too high. This typically involves filing an appeal with your local assessor’s office and providing evidence, such as recent sales of comparable homes or proof of inaccuracies in the assessment. A successful appeal could lower your property tax bill.

Do improvements to my home affect assessed value or market value?

Major improvements like renovations or additions can increase both assessed and market value, but assessed value may take time to reflect changes, depending on your local reassessment schedule.

Can market value change even if the assessed value doesn’t?

Yes. Market value fluctuates constantly due to supply, demand, and economic conditions. Assessed value is updated periodically, so it may lag behind market trends.

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