Difference Between Assessed Value vs Market Value | Propertylogy

Difference Between Assessed Value And Market Value

By on June 4, 2019

We would think that calculating the value of an asset as old-fashioned as a house is a problem that has been solved by the brightest minds decades ago.

But that is not the case.

Even today, there is a huge variety of methods that are used by students, home owners and professionals to determine home value… And all of them can come up with different figures.

Two of the most common and frequently compared against each other are the assessed value and market value.

Even that variables to tabulate market value of a house alone can be the source of fierce debate. But from this point on in this discussion, the market value should take reference to the fair market value.

What is assessed value

The assessed value is basically a valuation of a property, whether a building or house, that is assigned by the IRS for the purpose of tax calculations.

It is usually calculated by multiplying an assessment rate with the appraised value estimated by a qualified appraiser.

The assessment rate can vary widely from state to state which greatly affects the final figure.

For example, a property appraised to be worth $200,000 in a county with 80% assessment rate would have an assessed value of $160,000 ($200k x 80%).

What is fair market value

The market value refers to the most realistic transaction price of a property listed in the open market.

Thus, the fair market value (FMV) is the best representation of a property’s valuation in the real estate market.

After all, FMV should account for the various variables that can positively or negatively affect a property’s appraised value.

It must be noted that FMV can also vary wildly from appraised value, and can be either higher and lower.

Assessed value vs market value

If the differences between assessed value and fair market value is still not obvious to you, then there are 5 main factors that they differ in.


As mentioned earlier, there are a lot of methods and concepts in real estate valuation.

And they are different because the users are different. This is because they use them for different purposes with different focal points.

Assessed value is mainly used by government agencies such as the IRs.

FMV is mostly used by real estate agents, landlords, investors, buyers and sellers.


The purpose of working out assessed value is for property tax calculations.

The purpose of fair market value indicates the price that a willing buyer and seller would agree on for a transaction to take place.

Market volatility

As with all assets that are evaluated, there are going to be macro forces that affect them.

Assessed value is less affected by market fluctuations as the assessment rate is determined by people instead of economic indicators.

Market value however, is very much influenced by market forces.

For example, even if a house is valued at $500,000 which might the on the higher end of properties in that category, an obvious lack of demand can result in it going at a 25% discount.

Calculation variables

The inputs used as variables for equations can have dramatic impacts on estimating property value.

This is why various different methods of valuation are in practice in the real estate industry.

The determinants of assessed value calculation is very much determined by the municipalities that applies them.

While FMV will used factors such as recent transaction prices of comparable homes, conformity, age, freehold or leasehold, etc.

Size comparison

The assessed value is usually lower than market value.

This is because the government would be more prudent with tax calculations.

It would be better to use a more prudent number to calculate tax liabilities. Or disgruntled homeowners might feel that they have been victimized and stir up social unrest.

The takeaway from all these is that assessed value tend to be lower than market value.

So if you are in a situation where a lower value is more advantageous for one reason or another, the former would be better. And vice-versa.

This implies that in negotiations for price between buyer and seller, a buyer would tend to used assessed value as a subject to bring down the FMV which they would eventually transact on.

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