A question I get asked time and time again by first time home buyers, sellers, new flippers and even new agents is, “What’s the difference between assessed value and appraised value?” While many confuse these terms as being synonymous, this couldn’t be further from the truth. While they sometimes reflect the same or similar values of a home, there are times when they are at two opposite ends of the spectrum and here is why.
When it comes to evaluating a property the assessed value represents what your city or town’s assessing department feels your home is worth. This is important because it dictates how much you pay in taxes. The higher the assessed value, the more you pay, the lower the assessed value, the less you pay. Based on this understanding, it’s easy to see why a homeowner would want their assessed value to be lower. The good news is that in a rising market, assessed values tend to lag behind appraised values so you typically pay taxes based on an amount that is less than what your home is worth until it is reassessed. On the flip side when the market declines, you end up paying taxes based on what your home was worth at the top of the market until the next assessment is done. Your home’s value is usually assessed at least once every 12 months. Factors that impact your homes assessed value include market conditions, the sale of your home and improvements you make to your home.
The appraised value is what your home is worth in real time. This value is based on what comparable homes in your area have sold for over the past 6 months. There are two primary ways to learn your homes appraised value. The first is ordering a formal appraisal from a licensed appraiser. This usually
In short, As a buyer, seller or new agent, I encourage you to look at the market value and appraised value totally independent of the assessed value. The two are working with two separate windows of time and data so it’s best to seek the advice of a licensed real estate agent or appraiser if you really want to know your home’s worth.
P.S. This is for all the homeowners out there. One way to keep your assessed value down is to not let them in. If an Assessor ever comes to your house after you close or if you’ve recently done renovations it's probably in your best financial interest to not to let them in because if you've made improvements they are going to increase your assessed value and guess what…...your taxes are going to go! You can only play this game for so long, but at least it will buy you some time.