What is the difference between assessed value and market value?

The distinction between assessed value and market value is critical in property appraisal and taxation. Assessed value refers to the value assigned to a property for the purpose of taxation. This value is determined by local tax assessors and is used to calculate property taxes owed. It is often based on a percentage of the property's market value, which is subject to specific local regulations and assessment methods.

Market value, on the other hand, represents the price that a property would likely sell for on the open market under normal conditions. It reflects current market trends and comparable sales in the area, providing a more dynamic and fluctuating value based on demand and supply conditions.

Understanding this difference is essential for both property owners and appraisers, as it influences tax responsibilities and investment decisions. The practice of using assessed value for taxation stems from the need to ensure a steady revenue source for local governments, while market value serves as a guideline for buyers and sellers in real estate transactions.