One of the most confusing aspects of real estate is understanding your home’s worth. Terms like assessed value and appraised value appear often, yet they serve distinct purposes. Knowing the difference between them can help you save money, avoid surprises, and make smarter real estate decisions.

What Is Assessed Value?

The assessed value of a home is determined by your local government, typically through the county assessor’s office. This figure does not reflect your home’s current market value but is primarily used to calculate property taxes.

Assessors usually consider:

Factor	Description
Lot size & location	Larger lots or prime locations often carry higher assessments
Square footage & amenities	Extra bedrooms, bathrooms, or upgrades increase assessed value
Recent sales of similar homes	Comparable properties in your neighborhood influence assessments

Once determined, your city or county applies a tax rate to calculate your annual property taxes. For example, if your home is assessed at $400,000 and your local property tax rate is 2%, your yearly bill would be $8,000. Certain exemptions, such as for owner-occupied homes, may reduce taxes. If you feel your home has been over-assessed, you can appeal the property tax assessment.

What Is Appraised Value?

The appraised value reflects your home’s current market worth and is determined by a licensed appraiser. Unlike assessed value, it is not for tax purposes but is used by mortgage lenders to confirm the home’s value during buying or refinancing.

Appraisers evaluate:

Factor	Description
Recent sales of comparable homes	“Comps” determine the market baseline
Number of bedrooms & bathrooms	More rooms can increase value
Condition & upkeep	Renovations and maintenance affect appraisal
Location & neighborhood trends	Desirable areas typically raise value

For instance, if you plan to buy a home for $350,000 but it appraises at $325,000, your lender may adjust the loan to the lower amount. This situation, called an appraisal gap, may require renegotiation or additional out-of-pocket costs.

Assessed Value vs. Appraised Value: Key Differences

Feature	Assessed Value	Appraised Value
Purpose	Determines property taxes	Determines market value for mortgage approval
Determined By	Local government assessor	Licensed professional appraiser
Timing	Scheduled intervals (varies by state)	During home purchase, refinance, or as needed
Frequency of Change	Annually or every few years	Whenever an appraisal is ordered
Key Factors	Lot size, square footage, amenities, recent area sales	Condition, updates, comps, location, upkeep
Impact	Sets property tax bill	Influences loan approval and sale negotiations

Other Ways to Estimate Home Value

Besides assessed value and appraised value, homeowners often encounter:

Method	Description
Real estate comps	Recent nearby sales used for comparison
Comparative Market Analysis (CMA)	Detailed report from real estate agents using comps
Automated Valuation Models (AVM)	Online tools like Zillow Zestimate; convenient but less precise

These alternatives provide estimates but should not replace official assessments or appraisals.

Why Understanding Home Value Matters

Knowing your home’s value affects:

• Property taxes – Plan for changes in tax obligations
• Selling a home – Set a competitive asking price
• Buying a home – Avoid overpaying
• Refinancing or cashing out equity – Unlock equity or eliminate mortgage insurance

Bottom Line

Understanding the difference between assessed value and appraised value gives you more control over one of your biggest financial assets—your home. While assessed value impacts your property taxes, appraised value shapes your buying, selling, and refinancing opportunities. By knowing how each works, you can anticipate tax changes, negotiate effectively in real estate transactions, and make confident financial decisions that align with your goals.

 

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