Understanding Assessed Value vs. Market Value

One of the most important things to understand in real estate is the value of a property which is not always a simple concept for the average person to grasp. While the type of homeownership varies, there are really only two fundamental ways to understand a property’s worth – the assessed value and the market value.

While assessed value and market value may sound the same they are in fact two different concepts that are used to determine the value of a property, such as a house or a piece of land. They are calculated for different purposes and can often vary significantly. Here’s a brief explanation of each:

Assessed Value:
Assessed value is the value placed on a property by a government tax assessor or local municipality for the purpose of calculating property taxes. The assessment is typically conducted periodically (annually or every few years) and is based on factors like the property’s size, location, condition, and comparable sales in the area. Local tax authorities use the assessed value as the basis for determining the amount of property taxes the property owner must pay.
Assessed values are often lower than market values since they are primarily used for taxation purposes and not meant to reflect the current market conditions or actual selling price of the property.

Market Value:
Market value refers to the current value of a property based on the prevailing real estate market conditions. It represents the price at which a willing buyer and a willing seller would agree to transact, assuming both parties are knowledgeable about the property’s features and neither is under duress to buy or sell.
Market value is influenced by various factors, including location, property features, demand and supply in the market, economic conditions, interest rates, and comparable sales of similar properties in the area. Real estate agents, appraisers, or potential buyers often use market value to determine a fair price for buying or selling a property.

North Carolina law requires all counties to conduct a property reappraisal on real property at least every eight years to determine its market value. Real property includes land, buildings, structures and improvements.

In summary, assessed value is used for taxation purposes and set by local authorities, while market value is the estimated value of a property in the current real estate market. Market value is generally higher and fluctuates based on market conditions, while assessed value is usually lower and changes less frequently as it is used for consistent property tax calculations. At a time when many local government taxing authorities are conducting property reappraisals, it’s a good idea to gain an understanding of these two key concepts.