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What is the Difference Between Appraised Value and Assessed Value?

By R. Anacan
Updated May 16, 2024
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Appraised value and assessed value are both methods of evaluating the value of a home. The difference between the two is in who does the evaluating, what the evaluation is used for and how the evaluation is performed. Generally speaking, an appraisal is performed for the purpose of determining the value of a home for a home loan or purchase. An assessment is typically done by government tax assessor for the purpose of determining a property’s tax.

When a mortgage loan is originated, a lender will typically require that an appraisal be performed on the property to ensure that the loan amount will not be for more than the property is currently worth. In addition, most mortgage lenders impose a percentage guideline known as the loan-to-value (LTV) when originating a mortgage loan. Loan-to-value is defined as the percentage of the loan amount divided by the current value of the home. For example, if a mortgage lender has imposed a maximum LTV of 90% and a borrower’s home has an appraised value of $100,000 United States Dollars (USD), the maximum amount that a customer would be able to borrow is $90,000 USD. Therefore the higher the appraised value of the home, the larger the amount that a borrower will be able to borrow.

Appraisals are generally performed by a certified independent third party real estate appraiser that is unaffiliated with either the buyer or the seller. The appraised value of a home is considered the current market value of the home. Current market value is the appraiser's estimate of what the home could reasonably sell for. The value of a home is determined by comparing the home to other comparable homes in an area. The appraiser will consider what similar homes have sold for, along with the type of construction of the home, the overall condition, any amenities, views and location of the appraised property when determining the appraised value of a home.

In local governments that charge property owners a property tax, the assessed value is determined through the local tax assessors office. The assessed value of a home is not determined on an individual basis as the appraised value is. Rather, the tax assessor determines the value of a home based on a formula of recent home sale prices of comparable properties.

The frequency in which assessments are performed may vary locally; therefore the appraised value may not be an accurate estimate of a home’s current market value. Property owners who are interested in determining how their local governments calculate a property's assessed value or how their property taxes are calculated should contact their local tax assessor's office.

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Discussion Comments

By sneakers41 — On Aug 14, 2010

Sunshine31- I found that’s a common problem that's happening all over the country. The difference is not all communities where this is occurring solve this property tax problem the same way.

When considering how to appeal property taxes, it is best to speak with a real estate attorney who can file an appeal in your municipality.

The final judgment will be part of the county property records and it will tell you what your property tax assessment will be.

You still are obligated to pay your property taxes as the hearing does not give you a temporary waiver for property tax payment.

By Sunny27 — On Aug 14, 2010

Sunshine31- That is absolutely true. It had happen to me when I was trying to buy a condo in South Florida.

There were some communities that were off limits because the actual value could not be determined.

This poses another problem with property assessment. The property tax rate increases every year by about the same percentage, but due to the sharp decline in property values many communities had to appeal property tax increases because the property values were declining sharply.They did not feel that they should face tax increases at this time.

This happened in a county in Florida, and the county decided to reduce property taxes to correspond with the declining values.

But now they are talking about proposing a property assessment to fund the firefighters and police officers' pensions.

By sunshine31 — On Aug 14, 2010

A home appraisal is ordered by the bank when a borrower is seeking to purchase a property. The appraisal determines what the market will value of the property is.

This detailed report is given to the bank in order to verify the value of the home. An appraiser considers the properties size and condition along with previous sales of like-minded properties.

Areas with high levels of foreclosures often do not have a verifiable value. These properties are difficult to finance because the true value of the property is not known because foreclosures are not considered average property sales and cannot be factored into the appraisal.

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