Difference Between Assessed Value vs Market Value
The following article provides an outline for Assessed Value vs Market Value. The assessed value of a property is the value assigned by a Municipal Corporation of the district to personal property or any form of owned real estate. This is done solely for the purpose of property tax collection by these government bodies, after comparing it against similar residences or property. This tax collection procedure is an important factor in the issue of municipal bonds. Since a large portion of the revenue earned still remains from the property taxes for the municipal bodies, the quality of the bond issue is directly proportionate to the ratio of assessed value and net debt of the corporation.
The estimated or probable value of the property, after an informed valuation process, which the buyer and seller are willing to exchange it for, means the price the property will fetch in an open market transaction. Both the parties on the date of valuing the property should have acted prudently, knowledgeably, and without any undue influence to arrive at the value. Appraisers mostly look into the market value of your property also for the purpose of determining the mortgage financing options. How do you calculate the Assessed value of a property? Multiply your property’s market value by the assessment rate for your locality to find the assessed value before exemptions. For example, if your locality assesses your property at a rate of 10 percent and your property has a fair market value of $200,000, we multiply $200,000 by 0.10 to find the assessed value before exemptions, which would equal $20,000. So the assessed value would be around $180,000.
Head to Head Comparison Between Assessed Value vs Market Value (Infographics)
Below is the top 5 difference between Assessed Value vs Market Value:
Key Differences Between Assessed Value vs Market Value
Let us discuss some of the major differences between Assessed Value vs Market Value:
- The market value of a property, simply put, is the price of the property a buyer is willing to pay for it and the seller is ready to accept the same proposal. On the other hand, the assessed value is the value assigned by a tax assessor, who is appointed by the municipal corporation of the district in order to collect property tax.
The factors affecting the market value could be:
- External characteristics
- Internal characteristics
- Comparables
- Location
- Supply and demand
The factors affecting the assessed value
- What similar properties are selling for
- Replacement cost
- Recent improvements were done to the property
- Any income, in terms of rent, being made out of the property
- The assessed value of property usually lags the market value because the valuations done by a tax assessor are not recalculated so often or regularly. Since the tax collection is done on an annual basis, so the assessment of the property for the same purpose is done around the same time and frequency. However, depending on the area you live in or have your property, every time a property is sold to a new owner, it would require a reassessment. Sometimes, the Municipal Corporation re-assesses the property only when the last value becomes outdated.
Assessed Value vs Market Value Comparison Table
Let’s look at the top 5 Comparison between Assessed Value vs Market Value
| Basis of Comparison |
Assessed Value |
Market Value |
| Who decides the value? | A value placed on a property by a government official. | Price agreed by the buyer and seller who are willing to participate in the transaction. |
| Purpose of the Value | Value is assessed for the purpose of taxation. | For the purpose of selling. |
| The basis on the value assigned | Value is based on similar properties in a given area. | Value is based on similar properties across the city, not necessarily the same place. |
| Period of analysis | The value of the property is assessed on an annual basis. | Market value is decided on the market forces and, therefore, gets revalued every time there is a change in trend, buyers available, real estate norms, and regulations, etc. |
| Higher Value | Market Value is calculated as per the market forces looking at the same property and hence forms the base value for it. | The assessed value is mostly calculated over the market price by multiplying it with a factor called the assessment rate. Hence, this is always higher than the market value of your property. |
Conclusion
In order to understand the value of a property, it is always good, to begin with, the market value. There should be a clear rule where the seller proposes a price, and the buyer should have his own methods to understand the same and propose a fair asking price. While a property’s market value can fluctuate based on multiple factors, the assessed value is understandably more immune to such fluctuations. There is definitely no direct and definitive correlation as such between the two, and based on the side of the party you are hailing from – you decide which value is more suitable to you to go ahead with the transaction. This data is misused by many to showcase the higher of the two values as the http://transactionactual price of the property, one of those being the Real Estate companies and agents themselves realtors should make an effort in keeping the general public, like you and me, more informed towards the differences between the Assessed Value vs Market Value of properties, to make an informed decision.
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