Appraised Value Vs. Assessed Value

When determining a property’s values, you may come across two commonly used terms: appraised value and assessed value. The appraised value is determined by a professional appraiser who evaluates a property's market value, often during the buying, selling, or refinancing process. In contrast, local government authorities calculate the assessed value to determine property taxes. While the appraised value reflects what a property might sell for in the current market, the assessed value is typically a percentage of the market value and varies depending on local tax laws. 

Understanding the difference is crucial for homeowners, buyers, and sellers, as it impacts both property taxes and potential sale prices. Let’s dive a little deeper into the differences between appraised and assessed value. 

What is the difference between appraised value and assessed value?

Appraised value and assessed value serve different purposes in real estate. Appraised value determines the market value of a home, in other words, how much it would likely sell for in the current market. Assessed value determines how much a homeowner will pay in property taxes. 

Appraised value

The appraised value of a home is determined by a professional appraiser after an extensive evaluation of the property and reflects the market value of the home — essentially, what the home is worth in today’s real estate market.

Appraisers consider various factors, including:

• The size, layout, and condition of the home
• Comparable sales (similar properties recently sold in the neighborhood)
• Location and proximity to schools, parks, and other amenities
• Market trends and economic conditions

If you plan to finance your home purchase with a mortgage, an appraisal is usually a lender requirement. Lenders rely on this value to ensure the home’s worth aligns with the loan amount you’re requesting. An appraisal lower than the agreed-upon purchase price might require you to renegotiate with the seller or cover the difference out of pocket.

Key takeaway: The appraised value is specific to the current market and helps determine how much a lender is willing to loan you for the purchase. 

Assessed value

Your local government calculates the assessed value of a home for property tax purposes. Unlike an appraisal, the assessed value is often based on a formula established by your municipality, which may not reflect the exact market conditions or recent home sales.

Assessors generally consider:

• The home’s size, age, and condition
• The value of the property itself (land + structures)
• Local tax assessment rates

Key takeaway: The assessed value is tied to property taxes and is determined by local tax authorities, not the real estate market.

Which is higher, assessed value or appraisal?

It’s common for the appraised value to be higher than the assessed value. This is because it’s driven by current market conditions, while assessments are updated on an annual basis and do not account for property condition or improvements made to the home between sales. Also, appraisals tend to consider more factors about the specific property and its features, while the assessment follows general criteria. 

How to calculate appraised value

The appraised value is determined by a licensed appraiser and factors in a wide range of data points, like square footage, recent sales of comparable properties, the property’s condition, renovations, and more. While you’ll need a professional appraisal to get an official number, you can use Zillow’s Zestimate tool to get a feel for the value of a specific property. 

How to calculate assessed value

Assessed value is determined by a local tax assessor. The formula a municipality uses varies somewhat, but as a homeowner, your tax assessor’s office should provide a yearly update on your home’s value. This number is used to calculate how much you’ll pay in property taxes.

For example, if your property tax rate is 1.5% and your home’s assessed value is $250,000, your annual property tax bill would be $3,750. You can estimate your property taxes with Zillow’s Property Tax Calculator. It’s also a helpful tool for buyers who want to estimate their property tax burden on a home they’re interested in buying. 

Do appraisals affect property taxes?

Appraisals don’t directly affect your property taxes, as they’re not used to calculate property taxes. However, they do affect the sale price of a home, which can affect the assessed value in the future, once the sale is recorded. A home that sells for much more than its previous sale will typically see an increased assessed property value in the following tax year, leading to higher property taxes than what is reflected when a home is listed on the market.

It’s helpful to note that some homeowners qualify for property tax exemptions that allow them to deduct from their property’s assessed value.