Differences Between Assessed Value & Real Market Value of Houses

If you are considering selling your home, you probably found two different estimates of its value. One is called the "assessed value" and the other is called the "real market value." Even though they sound similar, these valuations are not always the same. It is important for a homeowner to understand how these different values are determined to help him set a realistic sale price for a home and negotiate during the sale.

  1. Purposes

    • The assessed value of a home plays a central role in determining taxes paid on that home. The value of a house for purposes of determining tax is set by a public tax assessor at certain times, such as when the ownership of the house is transferred or home improvements are made. The real market value of a home usually refers to a realistic offer the owner can expect to receive if he sells. The determination of a home's real market value often occurs when it is first put on the market.

    Benefits To Homeowners

    • Homeowners generally prefer a low assessed value for their homes. A low assessed value means they will usually owe less in property taxes. They can simultaneously benefit from having a high real market value.

    Variability

    • The assessed value of a home is not as likely to fluctuate as the real market value. This is primarily because the real market value is determined by what buyers will actually be expected to pay. While it may be nice to know your home has a high market value, market values are prone to change. The assessed value, however, often stays the same. Some states have laws that prohibit changing the assessed value of a home until the property is transferred. In practical terms, this means if the market value of your home dramatically increases over time, you will owe relatively less in property taxes.

    During the Sale

    • The assessed value of your home does not come into play during negotiations for the sale of your home. A prospective buyer or a realtor might refer to the appraised value as a reference during negotiations, but the actual price agreed upon between a buyer and seller is ultimately based on the real market value. Regardless of appraisals, what matters in the end is the value a buyer places on the house and how much he is willing to pay.