As a NW Indiana real estate agent I have helped many homebuyers understand the difference between assessed value and market value.
Assessed value should never be confused with market value. A home’s assessed value is the property value used by the local taxing authority to determine the owner’s tax liability. On the other hand is market value which is the price a homebuyer is likely to pay for the property.
Let’s take a closer look at what both tax assessed value vs market value mean and the differences between the two.
What’s the Difference Between Tax Assessment and Market Value?
Below is a comparison table to help you understand the difference between tax assessment and market value.
| Assessed Value | Market Value | |
| Use | Determining property tax liability | Marketing the property to homebuyers |
| Valuation Method | A sum of the parts of specific features at the property (varies by state) | Comparative market analysis based on recently sold comparable properties |
| Market Influence | None | Significant |
| Financial Implications | Higher assessed value will increase the owner’s tax liability | Indicates what a seller would receive upon selling the property |
Assessed vs Market Value: What Is Assessed Value?
Assessed value is a property valuation made by and used by the local taxing authority. Let’s take a closer look at the parts of an assessed value and its use.
What Determines Assessed Value?
Assessed value is typically determined through a sum of the parts using core criteria such as location, impervious area footprint, number of bedrooms, number of plumbing fixtures, and accessory structures. State statutes often provide a framework or procedure for finding assessed value.
When is the Next Property Reassessment?
Local tax authorities routinely reassess properties to ensure improvements upon a property become known and thus can be taxed. Each state has its own statute detailing when or what triggering events will cause a property owner to have the property reassessed. Real estate is reassessed every four years in Indiana.
How Is Assessed Value Used?
Assessed value is used as the base upon which the local tax rate is multiplied. This creates a product which indicates what a property owner’s property tax liability will be. Assessed value is not used whatsoever to determine a property’s market value.
Can You Dispute Your Home’s Assessed Value?
All states have an appeal process to dispute assessed value. Homeowners should learn their state’s appeal process and deadlines. Indiana homeowners can contact the Indiana Department of Local Government Finance to get information about the appealing assessed value in Indiana.
Northwest Indiana homeowners planning to sell should use our full-service listing with low real estate commission fees. Contact us or call us at (219) 309-609.
Tax Assessed Value vs Market Value: What Is Market Value?
Market value is an amount likely to be agreeable for a buyer to pay and for a seller to accept for a property in a competitive marketplace. Market value is determined by the market participants. Sales prices can be influenced by data and the opinions of real estate professionals including real estate agents and appraisers. Simply stated, market value is the price at which a property would sell.
What Factors Influence Market Value?
Specific factors affect a property’s market value. More importantly, many factors outweigh others. Here is a list of factors affecting market value in order starting with the greatest impact to the least impact.
- Location
- Number of bedrooms
- Numbers of bathrooms
- Above ground finished square feet
- Total finished square feet
- Home design: Examples include ranch, two-story, split level, bungalow, condo, townhome
- Age of the home: Many older homes have less desirable layouts, room sizes, and often lack modern interior features like large closets or a primary suite with an ensuite bathroom
- Upgrades & improvements: Examples include recent replacement of major components like a furnace, central unit, or water heater, updated finished, exterior improvements
- Accessories: This includes garages, accessory storage buildings, pools, and other additional structures
Lot size
What Is the Role of Market Value in Real Estate?
The role of market value is to act as a measuring stick for what a home is worth. It sets sellers’ expectations on what they will receive upon selling. On the other hand, market value communicates to homebuyers what to expect to pay for a property. Understanding what affects market value can help homeowners focus their efforts to increase their home’s value.
What’s the Relationship Between Assessed Value and Market Value?
A change in market value can cause a change in assessed value and vice versa. Some states, including Indiana, allow local assessors to include market value as one variable to determine assessed value. Therefore, as market value increases, assessed value will, too.
Rising assessed value can negatively affect market value. As the assessed value increases the total property tax amount will also increase. This can make your home less affordable to some homebuyers and could be so impactful that homebuyers offer less for your home.
How to Determine Market Value from Assessed Value?
To determine your assessed value you would need to understand how your state assesses real estate like yours. Sites giving blanket statements are likely incorrect because every state is unique. For Indiana homeowners you can learn about the assessment process from the Department of Local Government Finance.
The best way to determine your home’s market value is to contact a real estate agent to get a broker price opinion or an appraiser for an appraisal.
Bottom Line
Assessed value and market value shouldn’t be confused because one doesn’t drastically mean anything for the other and each is determined by its own unique process. Changes to assessed value or market value can affect the other, though, but typically not drastically.
For more information about your home’s market value contact a real estate agent in your area. If you are ready to sell your NW Indiana home you can get in touch with us by sending in the form or calling us at (219) 309-6098.
