What Does Assessed Value Mean And How Is It Determined?

The assessed value is a property’s determined valuation to calculate the appropriate tax rates. An assessment considers sales of similar homes, square footage, current market conditions and home inspection findings in its final determinations. 

If you’re selling a property, the tax-assessed value is the most widely accepted dollar value of your home. It’s also the most stable indicator of a home’s worth.

Property Tax And Assessed Value

The assessed value is used in determining property taxes. Depending on where you live, a municipal or county tax assessor will perform a property value assessment and local tax officials will calculate the property taxes based on the assessed value. The higher your home’s tax-assessed value, the higher your property taxes will be.

The homestead exemption includes property tax exemptions if the homeowner is the owner-occupant. For example, if the owner is the property’s resident and holds the property’s title, they’ll receive the homestead exemption.

What Is A Special Assessment Tax?

A special assessment tax is a type of surtax, or a tax levied on top of another tax, that helps fund improvements to a neighborhood or a property’s infrastructure. These projects may include road maintenance, street cleaning, landscaping, lighting, sidewalk paving and other recreational or public safety projects. Only homeowners living in a specific area, known as a special assessment district, are expected to pay the special assessment tax.  

An assessor finds the assessed value of a home based on the market value, the appraised value or a uniform percentage of the two. Municipalities and counties employ an assessor to determine the tax-assessed value of the homes in their jurisdictions. 

While market value and appraised value are essential, an assessor uses a comparative market analysis (CMS) when finding the assessed value to ensure that they’re making a fair and accurate assessment.

You’ll find several differences between market value and assessed value. Fair market value refers to a home’s determined selling price under current market conditions. Assessed value is informed by government tax assessors to decide how much a new homeowner can expect to pay in property taxes. Fair market value and tax-assessed value both help establish a home’s worth. 

Appraised value is another estimation of a home’s worth, and it’s different from assessed value. A home’s appraised value is essentially an expert opinion of its fair market value. Most mortgage lenders require a professional home appraisal before a buyer closes on a property. The appraisal serves to assure the buyer (and lender) that they aren’t borrowing (or lending) more money than the home is worth.    

Some of the factors considered when determining a property’s appraised or fair market value are:

• The general condition of the property
• Internal characteristics like square footage, number of rooms, energy efficiency, etc.
• Curb appeal
• Real estate comps
• Current market conditions, like whether it’s a buyer’s or seller’s market
• Location of the property and nearby amenities

A homeowner can increase their home’s value if they’re looking to sell. For example, you can upgrade your kitchen appliances or spruce up landscaping to raise the value of your home and appeal to potential home buyers.

The assessed value of a home is determined by an assessor who examines how a property will be taxed. This differs from an appraised value because the appraised value can change drastically with the market, and it differs from the fair market value because the fair market value can change based on both the market and the appearance of the home.

Getting a mortgage and going through the home buying or selling process can be confusing. Use the Rocket Mortgage^® Learning Center to learn more about mortgages, buying or selling a home, and much more.