Real Estate Appraisals vs. Assessment: An Important Distinction

Understanding real estate terminology is essential to navigating the buying and selling process—and few terms cause more confusion than "assessed value" and "appraised value." They sound alike, but they mean very different things, and knowing the difference can save you money and prevent surprises at tax time or closing.

Assessed Value vs. Appraised Value: What's the Difference?

Assessed value and appraised value are both measures of a home's value, but they serve different purposes. Assessed value determines how much a property will be taxed by a local governing body. Appraised value reflects a home's actual, current market worth. Many people assume the two should match—but they rarely do.

How Assessed Value Is Determined

Determining assessed value is a relatively simple process. A local assessor applies a formula built from comparative market analysis, the prior year's property data, and home inspection findings to arrive at the figure. In most cases the assessor doesn't even need to enter the home, since the value can be calculated from readily available data—though an in-person assessment can be conducted if needed.

How Real Estate Appraisals Work

A real estate appraisal, by contrast, is a far more in-depth process. Appraisals are conducted by state-licensed appraisers and give lenders and homebuyers assurance that they aren't lending or borrowing more than a property is actually worth. The appraiser tours the property and evaluates the building materials, overall condition, size, and any home improvements—among other factors—to estimate the home's fair market value. That market value becomes the price a buyer would reasonably pay on the open market, and it can also support other needs, such as property-tax appeals.

The Bottom Line

In short, a home's appraised value reflects what you could expect to receive if you sold it on the open market, while its assessed value determines how much you'll pay in property taxes. At Appraisals Unlimited, we can answer any questions you have about the distinction between these two terms—and handle all of your residential and commercial real estate appraisal needs. Our large team of appraisers brings deep local knowledge of the markets and brokers throughout the areas we serve.