If you are new to the real estate industry or happen to be a first time homebuyer, chances are at some point you have heard the terms "assessed value" and/or "appraised value". What you may not know is that these two terms are not referring to the same thing and each has its own significant importance when it comes to property taxation and real estate transactions. So what exactly is the difference?
Assessed Value
By definition, the assessed value is a value assigned to a property by a government assessor or tax authority for the purpose of determining property taxes.
Purpose: The primary use of the assessed value is to calculate the amount of property taxes that the homeowner or property owner is required to pay to the local government or municipality.
Calculation: The assessed value is often based on a predetermined formula set by the tax authority, and it may take into account factors such as the property's location, size, and any improvements or renovations made to the property.
Frequency of Evaluation: The assessed value is typically re-evaluated periodically, often on an annual basis, to adjust for changes in property values or local tax rates.
Appraised Value
By definition, the appraised value is an estimate of the property's fair market value, conducted by a licensed appraiser, usually in the context of a real estate transaction.
Purpose: The appraised value helps both buyers and lenders determine an appropriate and fair value for the property being bought, sold, or used as collateral for a loan.
Calculation: Appraisers use various factors to determine the appraised value, including recent sales of comparable properties in the area, the property's condition, features, and location.
Frequency of Evaluation: Appraisals are usually conducted when a specific real estate transaction is taking place. They are not performed on a regular basis like assessed values for property taxation.
To sum things up, the assessed value is determined by a government assessor and is used for tax purposes, while the appraised value is assessed by a licensed appraiser to determine the fair market value in a real estate transaction. As a result, the two values can often be different, as they serve distinct purposes.
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