The assessed value of a property is the value assigned to it by a public tax assessor for the purpose of determining property taxes.
It’s a way for local governments to calculate how much you owe in taxes based on the worth of your property.
Here’s how it works:
- Assessment Process: A tax assessor evaluates the property based on factors such as its size, location, condition, market value, and any improvements or renovations.
- Tax Rate: The assessed value is then multiplied by the local tax rate (also called the millage rate) to calculate your property tax bill.
- Differentiation from Market Value: The assessed value is not necessarily the same as the market value, which is what your property might sell for in the current real estate market. In many cases, the assessed value is a percentage of the market value, depending on local rules.
For example:
If a property has a market value of $200,000 and the local assessment ratio is 80%, the assessed value would be $160,000. If the tax rate is 1.5%, the annual property tax would be $2,400.
Why It Matters:
Understanding assessed value helps property owners anticipate their tax bills and budget accordingly.
If you believe your property’s assessed value is too high, you may be able to appeal the assessment.
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Here’s a simple table to highlight the differences between assessed value and other related property valuation terms:
| Aspect | Assessed Value | Market Value | Appraised Value |
|---|---|---|---|
| Definition | The value assigned by a tax assessor for taxation purposes. | The price a property would likely sell for in the current market. | The value determined by a professional appraiser based on an inspection and market analysis. |
| Purpose | Used to calculate property taxes. | Reflects what buyers are willing to pay. | Used for mortgage approval, refinancing, or property sales. |
| Determined By | Local tax assessor, often based on a percentage of market value. | Real estate market conditions, demand, and trends. | Licensed appraiser following specific valuation guidelines. |
| Frequency of Updates | Annually or as set by local laws. | Changes constantly with the market. | Done as needed (e.g., during a home sale or refinance). |
| Accuracy | May not reflect the true market or appraised value. | Reflects the property’s current worth in the market. | More precise and detailed compared to assessed value. |
| Disputes | Can often be appealed if you believe it’s too high. | No formal disputes, as it’s determined by buyers/sellers. | Rarely disputed unless errors are found in the appraisal. |
This comparison helps clarify the purpose and usage of assessed value versus market and appraised values.