How does market value differ from assessed value?

Market value and assessed value are distinct concepts in real estate, and understanding their differences is key to comprehending property valuation.

Market value refers to the estimated price that a property would sell for on the open market, assuming both the buyer and seller are knowledgeable and acting in their own interests. It reflects the current demand and supply of real estate, fluctuating with market conditions, and takes into account various factors such as location, property condition, and buyer sentiment.

On the other hand, assessed value is the value assigned to a property by a tax assessor for the purpose of determining property taxes. The assessment is often based on a set methodology that may or may not directly reflect the current market conditions. This value is usually a percentage of the market value and is periodically adjusted based on local real estate trends, but it does not change as frequently as market value does.

Understanding that assessed value is determined by a tax assessor clarifies why it can differ significantly from market value. While market value can change rapidly in response to the dynamics of the real estate market, the assessed value is more static and reflects what the local government uses for tax purposes, not necessarily what the property would sell for at a given moment. This distinction is crucial for buyers, sellers, and investors