Assessed Value: Definition and Explanation

Understanding the value of your property is crucial, especially when it comes to taxes and real estate transactions. One term you will often encounter is "assessed value."

Let's define assessed value, explain how it is calculated, and explore how to find the assessed value of a property.

What is Assessed Value?

The assessed value is the dollar amount assigned to a property by a public tax assessor for the purpose of determining property taxes. This value is typically a percentage of the property's market value and is used to calculate your annual property tax bill. The assessed value of property can vary significantly from its actual market or appraised value, depending on local assessment practices and timing.

In most jurisdictions, the tax assessor evaluates the property periodically, typically every one to five years, and assigns a value based on the property’s characteristics, improvements, and sometimes comparable sales. The tax-assessed value may also include exemptions or reductions if the owner qualifies for programs such as homestead exemptions.

Assessed Value vs. Market Value

One common point of confusion for homeowners and buyers is the difference between assessed value and market value. These are two distinct figures:

• Market value: The estimated amount a buyer would pay for a property in the current market conditions. Determined by real estate agents, buyers, and sellers.
• Assessed value: The value placed on a property by a tax assessor to determine tax liability. It is often a percentage (e.g., 70%-90%) of the market value.

For example, if a home's market value is $400,000 and the local assessment rate is 80%, the assessed value would be $320,000.

When comparing tax-assessed value vs market value, it’s essential to recognize that the assessed value is primarily for tax purposes, while the market value is what the property could reasonably sell for in an open market. Market values fluctuate based on demand, economic conditions, and neighborhood trends, while tax-assessed values are more static and may not reflect recent changes.

A property might sell for far more or less than its tax-assessed value depending on the current market climate.

Assessed Value vs Appraised Value

Another important distinction is assessed value vs appraised value:

• Appraised value: Determined by a licensed appraiser, often during a property sale or refinance. It reflects the property's value based on detailed criteria such as condition, location, upgrades, and comps.
• Assessed value: Used solely for tax purposes and determined by a local tax assessor. It may not be as comprehensive or current as an appraisal.

While appraised value is more accurate in determining what a lender will loan on a property, the assessed value directly impacts your property tax bill.

Assessed Value of Property: Why It Matters

The assessed value of property plays a central role in local government financing. Property taxes fund public services like schools, police, fire departments, and infrastructure. Therefore, the fairness and accuracy of assessed values are vital for equitable tax distribution.

Understanding your assessed value helps you:

• Estimate your property taxes
• Budget accurately
• Identify discrepancies
• Contest unfair assessments

How to Find Assessed Value of Property

Many homeowners wonder how to find assessed value of property. Here are common ways to locate it:

1. Local tax assessor’s website: Most counties and municipalities have online databases. Simply enter your address or parcel number.
2. Property tax bill: Your annual or semi-annual property tax bill usually lists the assessed value.
3. Visit the assessor’s office: If information is not online, a visit or phone call to your local assessor can provide the data.
4. Real estate websites: While not official, some platforms display assessed values pulled from public records.

Knowing how to find this value empowers you to ensure its accuracy and take action if needed.

What Affects Property Assessment Value?

Several factors can influence your property assessment value, including:

• Location, as neighborhood desirability and school districts impact value.
• Size and features, such as square footage, number of bedrooms, bathrooms, and amenities.
• Condition, including renovations, maintenance, and overall upkeep
• Comparable sales and prices of similar nearby homes
• Market trends, including economic changes and housing demand in the area

If your property has changed significantly due to a remodel or deterioration, your assessed value may be adjusted accordingly.

Can You Challenge an Assessed Value?

If you believe your assessed value is too high, most municipalities allow you to appeal. You may need to:

• Submit a formal request
• Provide documentation (e.g., recent appraisal, photos, sales comps)
• Attend a hearing or meeting

Reducing an unfairly high assessed value can lower your tax bill significantly.

The Final Word on Assessed Value

Understanding what tax-assessed value is and how it differs from market and appraised values is essential for any property owner. The assessed value affects your taxes, budget, and overall understanding of your property’s worth. Whether you're buying, selling, or simply reviewing your annual property taxes, knowing how to navigate property assessment value can save you money and avoid surprises.

Understanding your property's assessed value is also a key step in maximizing the benefits of a 1031 exchange. Whether you're deferring capital gains taxes or evaluating your next investment move, knowing how your property is valued can make all the difference. Contact First American Exchange Company today to see how your current property's assessment impacts your exchange potential and long-term tax strategy.