What Is the Difference Between Assessed Value and Market Value?

If you’re buying or selling a home, you’ve probably come across two important terms — assessed value and market value. While they sound similar, they serve very different purposes in real estate. Understanding how these values are determined can help you make smarter decisions when pricing your home, making an offer, or calculating property taxes.

In this blog, we’ll break down the key differences between assessed value and market value, how each one is calculated, and why both matter for homeowners and real estate investors.

Understanding Market Value: What Your Home Is Really Worth

Market value refers to the price a home would likely sell for in the current real estate market. It represents the amount that a willing buyer would pay and a willing seller would accept in an open, competitive market.

Unlike assessed value, which is primarily used for property tax purposes, market value reflects the true demand and perception of value based on current conditions.

How Market Value Is Determined

Real estate professionals, appraisers, and buyers consider several factors when determining a property’s market value:

• Comparable Sales (Comps): The prices of recently sold homes in the same area with similar size, style, and condition.

• Location: Homes in desirable neighborhoods or near top-rated schools tend to have higher market values.

• Property Condition and Upgrades: Renovations, modern finishes, and well-maintained landscaping can increase value.

• Market Trends: Supply and demand, mortgage rates, and overall economic health influence home prices.

• Size and Features: The number of bedrooms, bathrooms, square footage, and amenities (like a pool or waterfront view) also play a major role.

Why Market Value Matters

For sellers, knowing your home’s market value helps you price your property competitively to attract serious buyers and avoid overpricing.
For buyers, it ensures you’re making a fair offer and not overpaying.
For homeowners, understanding market value can also help you track equity growth and decide when it’s the right time to refinance or sell.

In other words, market value is the number that most closely reflects what your home is truly worth today in the open market.

Understanding Assessed Value: What the Tax Office Thinks Your Home Is Worth

The assessed value of a property is the value assigned by the county property appraiser’s office for taxation purposes. This number determines how much property tax you owe each year.

Local governments use assessed value to fund public services such as schools, police, infrastructure, and parks. It’s not meant to reflect the home’s actual market worth — it’s simply a tax assessment tool.

How Assessed Value Is Calculated

The formula for assessed value can vary by state or county, but it generally involves:

Assessed Value = Market Value (or Appraised Value) × Assessment Ratio

For example, if a home’s market value is $500,000 and the local assessment ratio is 85%, the assessed value would be $425,000.

Keep in mind that assessment ratios and exemptions (like Homestead Exemptions in Florida) can significantly reduce the taxable portion of your property’s value.

Why Assessed Value Matters

Assessed value affects your annual property tax bill, so it’s important to review your assessment regularly. If you believe your property has been overassessed, you have the right to appeal the valuation through your local property appraiser’s office.

For homeowners in states like Florida, the assessed value may also increase gradually each year, even if your market value jumps, due to assessment caps (such as Florida’s “Save Our Homes” limit).

Key Differences Between Assessed Value and Market Value

Here’s a simple comparison to make the difference crystal clear:

Why the Difference Matters for Homeowners and Buyers

Knowing the difference between assessed and market value can save you money and stress. Here’s why:

1. For Sellers: Setting your listing price based on the market value, not the assessed value, ensures your home attracts the right buyers and sells faster.

2. For Buyers: Understanding these values helps you identify if a property is priced fairly and anticipate property tax costs.

3. For Homeowners: Regularly reviewing your property tax assessment can help you avoid overpaying and keep your financial planning accurate.

4. For Investors: Distinguishing between the two values is essential when analyzing rental income potential, ROI, and long-term appreciation.

Can Assessed Value and Market Value Be the Same?

Occasionally, they can be close — especially in stable markets where home prices aren’t fluctuating dramatically. However, in most cases, the assessed value is lower than the market value.

For instance, a home with a market value of $700,000 might have an assessed value of $560,000, depending on local assessment rules.

This difference is intentional — the goal of assessed value is not to estimate your selling price, but to create a consistent tax basis across all properties in your community.

In summary, the market value represents what your home is worth to buyers today, while the assessed value represents what your home is worth for tax purposes.

Both are important, but for very different reasons. Market value helps you understand your equity and selling potential, while assessed value determines your property tax responsibility.

If you’re thinking about buying or selling a home, consult with a local real estate professional who can provide a Comparative Market Analysis (CMA) to help you determine your property’s true market value.

And if you ever feel your tax assessment doesn’t accurately reflect your home’s condition or local values, don’t hesitate to file an appeal with your property appraiser’s office.G