Tax Assessments vs. Market Value

The difference between a property's tax assessment and market value lies in their purposes and methods of calculation:

  1. Tax Assessment:

    • Purpose: Tax assessments are conducted by local government authorities to determine the property tax owed by the owner.
    • Calculation: Tax assessments are typically based on a percentage of the property's assessed value, which may be determined by local tax assessors using various methods such as mass appraisal techniques, recent sales data, and property characteristics.
    • Timing: Tax assessments are usually conducted periodically by the local government, often annually or biennially.
    • Variability: Tax assessments may not always reflect the current market value of the property, as they are primarily used for taxation purposes and may lag behind changes in the real estate market.
  2. Market Value:

    • Purpose: Market value represents the price that a property would likely sell for under current market conditions.
    • Calculation: Market value is determined by analyzing recent sales of comparable properties in the area (comparative market analysis) and considering factors such as location, size, condition, and amenities.
    • Timing: Market value can fluctuate based on changes in the real estate market and is typically determined when a property is bought, sold, or refinanced.
    • Accuracy: Market value is considered a more accurate reflection of a property's worth in the current market compared to tax assessments, as it considers recent sales data and other market factors.

In summary, while tax assessments are used for determining property taxes owed to the local government and may not always align with current market conditions, market value reflects the price a property would likely sell for in the current real estate market based on recent sales data and other relevant factors.