Preparing to purchase a home can be an exciting time. After all, you’re setting up the next chapter of your life. But you’ll encounter a multitude of new terms throughout the process, and you’ll want to take the time to understand how it can affect your home ownership journey.
For example, understanding the difference between the assessed value vs. market value can help you ensure the numbers of a particular property add up. Let’s take a closer look at what you’ll need to know.
Tax Assessed Value Vs. Market Value FAQs You now know the basic definitions of the assessed value vs. market value. But it’s understandable if you still have a few questions about the distinction. Let’s take a minute to answer some of the most common questions about assessed and market value and the relationship between them.
Is An Assessment The Same As An Appraisal?
An assessment is not the same thing as a traditional property appraisal. However, it is a specific type of appraisal that is can only be used for tax purposes.
A lender will not accept a tax assessment in place of a conventional property appraisal. If you’re buying or refinancing a home, you’ll need to order a property appraisal that’s unique from the tax assessment.
Lenders will require a conventional appraisal because of the methodology differences. With a conventional property appraisal, the lender will receive a better approximation of the fair market value. With that, it can determine how much a borrower can receive to close on the property.
Do Market Value And Assessed Value Influence Each Other?
When considering the assessed value vs. market value, it’s important to realize that these two numbers are often connected. Throughout the home sale process, it’s not uncommon for realtors to point out the assessed value to market a home. On the flip side, assessors will often take the market value into consideration.
For example, let’s consider a home that has recently undergone a kitchen renovation. With that the market value would likely increase to reflect the upgrades. Not only that, but the assessed value will likely increase as well based on increased market value.
Can Taxpayers Dispute Assessed Values?
As a taxpayer, you can absolutely dispute the assessed value. In fact, you might be surprised to learn that taxpayers frequently exercise their option to dispute the assessed value of their home.
If you want to dispute the assessed value of your home, then consider reaching out to your local tax collectors’ office. They should be able to provide directions for your request
When Market Value Matters And How It Is Calculated
The market value of a home is often referred to as the fair market value. Whether you’re buying a house or selling a house, this is a critical number. Essentially, the market value determines how much a home will cost.
How Is A Fair Market Value Determined?
A standard formula does not define the fair market value of a home. As you seek to determine the fair market value, real estate comps and appraisals will play a role in setting this price. Typically, a rough estimate can be determined based on the square footage in relation to comparable properties in the area. Plus, a professional appraiser can provide a somewhat accurate estimate.
However, these numbers will only get you so far. Ultimately, the fair market value will be determined based on what a buyer is willing to pay for a property.