The Difference Between Assessed Value, Appraised Value, and Market Value of a Home

Man thinking about value of home

When in the market to buy or sell a home, you’ll encounter many numbers. Though, none are more important than the listing price or home value.

What makes them different? It depends on where you are in your home buying journey and whether you’re the buyer or seller, of course. But to provide some clarity — let’s take a look at what market value, assessed value, and appraised value are.

Here’s what you need to know.

What is Market Value?

Market values are consumer-driven. They are usually the agreed upon price that a buyer pays and seller accepts. You can determine the fair market value of a house by:

  • Considering the property features and overall condition

  • Seeing what similar homes — within that neighborhood — have sold for recently

  • Reviewing the current real estate market trends

Tip: When to use market value

It’s important to remember that market values are not official appraisals, so they should only be used as a starting point when determining a home’s worth. An easy to use online tool is Zillow Zestimate or eppraisal.com. Though another, more thorough starting point may be a comparative market analysis (CMA) created by your realtor.

Looking to have a CMA done in Colorado? Let our sister company American Home Agents help!

What is Appraised Value?

A home appraisal is an objective, third party assessment of a home’s market value. They’re ordered by mortgage lenders to assess the market value and to ensure the borrower isn’t trying to borrow more money than the home is worth. So, the appraised value sets the amount that may be mortgaged for a property.

The third party assessors who determine the value are known as appraisers. Appraisers often work for appraisal management companies, or AMCs, and they operate in a heavily regulated industry. Licensed appraisers are expected to complete 150 hours of state regulated education, 1,000 hours of field work, plus ongoing education after they are licensed (hours may vary by state and credentials).The combined classroom and field education prepares them to determine the value of a home.

Tip: Boost your home’s appraisal value

Remember the $500 rule: homes appraise in increments of $500. So, if there’s a repair or replacement (over $500) that can be made, take care of it. It may be as simple as getting a new appliance or new windows.

Looking for more ways to upgrade your home? Check out our Top Home Improvement Projects article.

What is Assessed Value?

An assessed value is a figure local governments use to determine property tax. It’s a percentage of the property’s fair market value, and it’s calculated by your county’s assessor. There is no appraiser involved.  Though it is not directly related to the home offer and negotiation stages, it is something to pay attention to during the home buying process (as it’s often used to estimate your escrow) and especially once you become a homeowner (as it relates to property taxes). After all, property taxes are usually the second biggest homeowner expense after a mortgage.

Tip: Why you should investigate a high assessed value

The higher your home's assessed value, the more you'll pay in taxes. If you feel the assessed value of your home is wrong, go to your county’s assessment website. There you can check all information for any mistakes — like the wrong square footage or wrong number of bathrooms — so you’re billed the correct amount when property taxes are due.

Key Takeaways

  1. Home buyers should be most concerned with the fair market value of a home because it’s what you should base your offer on. After all, it is the market that determines what a particular asset is worth at a particular time.

  2. Low appraisals happen. Maybe the property was overpriced, or there are declining market values due to fewer buyers. There are solutions around it.

  3. You can challenge your assessed value. Keep in mind, your property is not accessed annually, and the exact frequency varies by state. So it’s important to understand your state or county’s process. For example, in Colorado, all real property (land, buildings, improvements, etc) must be re-appraised every two years. This occurs in each odd-numbered year (2015, 2017, etc).

As you prepare for — or continue along — your home ownership journey, be sure to keep your finances top of mind. Whether it’s getting pre-approved for a new home loan or refinancing an existing mortgage to achieve greater monthly (or long term) savings, let the salary-based mortgage consultants at American Financing help. We’re even open nights and weekends to fit your busy schedule.