Assessed Value vs. Market Value: What is My Home Actually Worth?

When buying, selling, or owning a home, you’ll often hear two different values associated with a property: assessed value and market value. While they sound similar, they serve different purposes and are calculated in different ways. 

A home’s assessed value is used for property tax purposes, while market value is used to determine a home’s value in the current real estate market.

This Redfin article breaks down the differences between assessed value vs. market value, helping you understand how each is determined, why they matter, and how they impact your finances. Whether you’re buying a home in Fort Worth, TX or you’re refinancing your home in Detroit, MI, you’ll know how to evaluate your home’s worth and which value to focus on.

Key differences between assessed value vs. market value

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What is assessed value?

Assessed value is the value assigned to a home for tax purposes. Local governments use this value, not the home’s market price, to calculate property taxes.

How is the assessed value of a home determined?

Tax assessors typically evaluate properties on a regular schedule, which could be annually, every few years, or only when a property changes ownership, depending on local laws. 

Local tax assessors calculate a home’s assessed value based on:

• The property’s market value (typically derived from recent home sales in the area)
• The home’s square footage, age, condition, and features
• Local tax rates and assessment laws
• Comparable home values in the neighborhood

However, most local governments don’t tax you on 100% of your home’s market value. Instead, they apply an assessment ratio, which is a percentage of the estimated market value that is actually taxed.

Key things to know about assessed value:

✔ Used only for property tax calculations

✔ Typically lower than market value

✔ Updated on a set schedule by tax assessors

✔ You can appeal it if you think it’s too high

Example of how assessed value is calculated

To calculate a home’s assessed value, the following formula is typically used: 

Market value x Assessment ratio = Assessed value

Let’s say your home has a market value of $300,000, and your local assessment ratio is 80%.

$300,000 x 0.80 = $240,000

Your assessed value would be $240,000, and your property taxes would be based on that number, not the full market value of $300,000.

What is market value?

The market value of a home is how much it would sell for in the current real estate market. This number is determined by buyer demand, economic conditions, and comparable home sales.

Unlike assessed value, market value is not determined by the government, it’s shaped by what buyers are willing to pay. It fluctuates based on supply and demand, mortgage rates, and local trends.

How is the market value of a home determined?

Market value isn’t set by a government office. Instead, it’s determined by:

• Recent sales of similar homes (comparables or “comps”)
• Location (neighborhood, school district, amenities, desirability)
• Condition and features of the home (updates, layout, curb appeal)
• Supply and demand of your local real estate market
• Interest rates and economic conditions

How can you find your home’s fair market value?

There are several ways to find your home’s fair market value. The most common ways include:

• Online home valuation tools: The Redfin Estimate provides a free and instant estimate of how much your home is worth based on various data points, such as market conditions, your home’s features, location, etc.
• Comparable market analysis (CMA): A report from a real estate agent that compares your home to similar recently sold properties in your area. It considers factors like size, condition, and location to estimate what your home could sell for in the current market.
• Home appraisal: An appraisal provides an in-depth evaluation of your home’s value by assessing its condition, features, and location, and comparing it to similar properties in the area. This method delivers an official, accurate estimate, often required for mortgage or refinancing purposes.

By using one or more of these methods, you can get a well-rounded understanding of your home’s fair market value, and from there, make informed decisions about your next steps.

Key things to know about market value:

✔ Determines how much a home will sell for

✔ Constantly changes based on market conditions

✔ Usually higher than assessed value

Why and when the difference between assessed and market value matters

If you’re a homeowner: Property taxes are based on assessed Value

• Your assessed value determines your property taxes, not your home’s market value.
• Even if home prices in your area rise, your property taxes won’t increase immediately because assessed values are updated periodically and are typically lower than market value.

If you’re selling: Market value determines your sale price

• Buyers and real estate agents ignore assessed value when making offers.
• Your home’s selling price depends on market value, based on recent sales of similar homes.

If you’re refinancing or taking out a home equity loan: Market value matters

• Lenders base refinance terms and home equity loans on market value, not assessed value.
• A higher market value means more home equity, which can help you qualify for better loan options.

If you’re appealing your property taxes: Focus on assessed value

• If your property tax bill seems too high, you can challenge the assessed value.
• Providing evidence that similar homes are assessed for less, or that your assessment is outdated, could lower your property taxes.