Assessed, Appraised, Market Value Explained

What You Need to Know

In real estate, there are three terms that indicate a home’s valuation: Appraised Value, Assessed Value, and Market Value.

It’s easy to confuse them when considering buying a home, obtaining a mortgage and contemplating ongoing costs of ownership. Here’s what they mean and how they relate to each other.



Assessed Value

Assessed value is a value for a property that is determined by an entity such as a local municipality, a county, or other governmental agency to determine its value for the purpose of calculating property taxes. These taxes can be used to cover the cost of schools, police and fire services, infrastructure, and other local government expenses.

Taxation is the sole purpose of the assessed value.

The assessed value is usually based on factors including: what similar properties are selling for, recent home improvements, income derived from renting, and the current replacement cost of the property.

The assessed value is usually lower than the fair market value of a house.

Appraised Value

Appraisals are an underwriting tool used by banks and other lenders to determine if the property is appropriate collateral for the loan.

During the process of applying for a home mortgage, the appraiser uses recently sold comparable properties accounting for differences in specific amenities such as square footage, the age of the roof, exterior and interior materials, type and age of heating and cooling equipment, and other factors.

The appraisal relies on the appraiser’s own experience, understanding and knowledge of the area and property type.

During a home sale or refinance, the appraiser typically is the choice of the lender but paid for by the borrower.

Fair Market Value

The fair market value (FMV) is the fair price for a particular home based on current market conditions. Market value of a property is what a buyer is willing to pay and the price that a seller is willing to accept.

It is based on the forces of supply and demand. If any of the circumstances change, the market value changes.

Factors that determine a property’s market value include: curb appeal, internal characteristics of the home, comparable home prices in the neighborhood, supply and demand, interest rates and location.

Assessed, Appraised, Market Value Explained
Assessed, Appraised, Market Value Explained
Assessed, Appraised, Market Value Explained
Assessed, Appraised, Market Value Explained

Final Thoughts


  • When it’s time to buy or sell, remember that a motivated buyer may be willing to pay a higher price for a home than its appraised value, thereby adjusting the true market value. That’s why a knowledgeable agent is important in helping you determine the factors affecting the value of your home.
  • Let’s Connect. We’d Love to help.

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November 22, 2020

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