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What’s the difference between assessed value, market value, and appraised value?

June 13, 2024

Assessed Value

An Assessed Value is what your local tax assessor or appraisal district believes your property is worth. Assessed value for residential property is the primary method for a local government authority to collect an appropriate amount of taxes to sufficiently cover operational expenses. Assessed value is not indicative of market value or replacement value. Taxing authorities use all kinds of formulas, but mostly they look at similar properties in the same area and assess based on mass sale data, or as they call it “Mass Appraisal”. Some counties will multiply the market value by an assessment ratio to get the tax assessed value, which is often lower than the market value (for example, a particular county might calculate taxes based on FMV x .8, or something like that). You can challenge the assessed value of your home by contacting your local county Assessor’s Office or Appraisal District [click here to look up the county Assessor/Appraiser Office for your county], but make sure you have good data to support your challenge (they have lots of data to support their assessment). And, of course, you must follow the tax protest procedures to the letter.

Fair Market Value

Generally, the Fair Market Value (FMV) is the meeting of the minds between a willing and informed Buyer and willing and informed Seller. After all, property is ultimately worth whatever a reasonably knowledgeable buyer is willing to pay for it.

Appraised Value

An Appraised Value is the qualified opinion of a licensed appraiser and is considered the only technical method to determine Fair Market Value. It is the job of an appraiser to determine what would the property sell for on the open market, between two informed parties. Appraised value is required by lenders, investors, and attorneys because it is backed by accepted valuation methodology, standard calculations and adjustments, and up-to-the-minute market data. Lenders use Appraised Value because they want an unbiased professional to validate the collateral used for a mortgage. Attorneys use Appraised Value because it is the only neutral opinion of value in divorce and estate settlements. Investors use Appraised Value to confirm their research, validate investment decisions, and reduce risk of potential litigation. 

In theory, an Appraised Value and Fair Market Value should be fairly similar. In fact, Aloft Appraisal is most often hired to determine FMV in cases of divorce or estate settlement. Generally, the sale market is efficient, and homes are bought and sold at fair value, unless there are extenuating circumstances (for example, someone who wants to buy their neighbor’s house might pay above-market value to own side-by-side properties). One can make assumptions about FMV, an appraisal backs up those assumptions with facts. At Aloft Appraisal, our adjustments, our inspections, and our mathematical approach are precise, supported, and verifiable. When you need an accurate number, call Aloft Appraisal. 

About the author:
Mike Stevens
VP of Corporate Development

Mike is one the founding team members with Aloft Appraisal. He has many years of experience in all aspects of real estate, including appraisal, title, escrow, and finance. Mike is the current team leader of Aloft Direct Sales, which offers private appraisal orders for estate settlement, divorce settlement, immigration, and taxes.