Market Value vs. Tax Appraisal Value: What's the Difference?
Your home’s value isn’t always a fixed number. Ask a real estate agent, your county tax office, and a mortgage lender, and you might get three different answers. That’s because there’s a difference between market value and tax appraisal value, and understanding both can save you from surprises when buying, selling, or refinancing a home.
Market value reflects what buyers are willing to pay. Appraised value, on the other hand, is what an expert determines your home is worth. And then there’s the assessed value, which impacts your property taxes. Confusing? Don’t worry, we’re breaking it all down.
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Appraised Value vs. Market Value
If you’ve ever looked at home prices, you may have noticed that the value of a property isn’t always a single, fixed number. Market value and appraised value are two different ways to determine what a home is worth, and understanding both is key whether you’re buying, selling, or refinancing.
Market value is what buyers are currently willing to pay for a home. It fluctuates based on demand, location, interest rates, and even broader economic trends. A house in a hot neighborhood with great schools and limited inventory? It’ll likely have a high market value because more buyers are competing for it.
Appraised value, on the other hand, is determined by a licensed appraiser who conducts an in-depth evaluation of the home. Instead of looking at trends, they assess the property’s physical condition, features, and recent comparable home sales to determine its objective worth.
While market value is shaped by buyer demand, appraised value provides a professional opinion used by lenders to ensure they’re making a sound loan decision.
What Is Appraised Value?
An appraised value is a professional assessment of a home’s worth. Lenders require appraisals before approving a mortgage to make sure they aren’t lending more than the home is actually worth. This protects both the lender and the buyer from overpaying.
During an appraisal, an expert evaluates key factors like the home’s size, condition, location, and upgrades. They also review recent sales of similar properties in the area, also known as “comps”, to determine a fair valuation.
If a home appraises lower than the agreed-upon purchase price, it can create challenges for both buyers and sellers, potentially requiring renegotiation or a larger down payment to make up the difference.
Appraised value also plays a role in refinancing. If a homeowner is looking to refinance their mortgage, a new appraisal helps determine how much equity they have and whether they qualify for better loan terms.
What Is Market Value?
Market value is what a home would sell for in the open market under current conditions. Unlike appraised value, which is based on structured analysis, market value is driven by what buyers are actually willing to pay.
Supply and demand have a huge influence here. If inventory is low and buyers are competing for homes, market values rise. On the other hand, if there’s a surplus of available properties and fewer buyers, market values can drop.
Beyond demand, factors like a home's location, recent upgrades, neighborhood amenities, and even interest rates all impact market value. A house in a sought-after school district or near major job hubs will likely have a higher market value than a similar home in a less desirable area.
While market value and appraised value are often close, they don’t always match. A home could have a high market value due to bidding wars, but if it doesn’t appraise for that amount, a lender might not approve the full loan amount.
That’s why understanding both values is important, especially in competitive housing markets.
Appraisal vs. Assessment: Impact on Home Value
Appraisals and assessments both determine a home's value, but they serve different purposes. An assessment affects your property taxes, while an appraisal impacts home sales and refinancing.
Understanding how each one influences your home's value can help you make informed financial decisions.
Property Taxes Depend on Assessments
Assessments are conducted by local tax authorities to calculate your property taxes. They consider factors like your home's location, size, and any upgrades you've made. Since property taxes are based on this value, a higher assessment means paying more in taxes.
Unlike appraisals, assessments follow a set government schedule and aren’t necessarily updated based on real estate trends. Even if your home’s market value drops, your assessed value might stay the same, or even increase, if local tax rates go up.
Appraisals Influence Selling and Refinancing
When selling or refinancing a home, the appraised value is key. Lenders use it to determine how much they’re willing to loan, and buyers use it to justify a home’s price.
If the appraisal is high, you may secure a better loan or justify a higher asking price. A low appraisal, however, can derail a sale or require renegotiation.
Unlike assessments which are focused on taxation, appraisals are designed to reflect current conditions of the house, making them more relevant when dealing with mortgages or real estate transactions.
Home Improvements Can Affect Both Values
Upgrades like a new kitchen, a finished basement, or a home addition can raise both your appraised and assessed values. A higher appraisal could mean a better selling price, while a higher assessment could mean a larger tax bill.
However, not all improvements impact these values equally. Some renovations boost resale value but don’t significantly raise assessments, especially if they aren’t reported to local tax authorities.
On the other hand, structural changes or major upgrades, like adding square footage, are more likely to increase both values.
How to Dispute an Appraisal
A low appraisal can be frustrating, especially if it affects your ability to sell or refinance your home. But you don’t have to accept it without question. If you believe the appraisal is inaccurate, there are steps you can take to challenge it and potentially get a revised valuation.
Review the Appraisal Report Thoroughly
The first step in disputing an appraisal is carefully reviewing the report for errors. Double-check key details like square footage, the number of bedrooms and bathrooms, and any recent renovations.
Sometimes, appraisers miss important upgrades, such as a remodeled kitchen or a finished basement, which can significantly impact the value.
Also, look for incorrect data about the neighborhood, if the appraiser relied on outdated or incorrect information, it could skew the final valuation. If you find any mistakes, document them thoroughly.
Providing clear, factual evidence of errors can help strengthen your case when requesting a reconsideration.
Gather Comparable Sales Data
One of the strongest ways to dispute a low appraisal is by providing better comparable sales, also known as "comps." These are similar homes in your area that recently sold for a higher price than your appraisal suggests.
Look for properties with similar square footage, lot size, age, and upgrades. If the appraiser used outdated comps or included homes that don’t accurately reflect your home’s value, that could be a valid reason for an adjustment.
Work with your real estate agent to pull relevant data and present a list of stronger comps that better represent current market conditions. A well-supported argument with concrete sales data can make a compelling case for a higher appraisal.
Submit a Reconsideration of Value (ROV) Request
If you've found factual errors or stronger comparable sales, the next step is to file a Reconsideration of Value (ROV) request. This is a formal appeal submitted to your lender, asking the appraiser to review additional evidence.
When submitting an ROV, make sure your request is well-organized and clearly outlines why the original appraisal may be inaccurate. Include any incorrect property details, overlooked home improvements, and better comps that justify a higher value.
While an ROV isn’t guaranteed to change the appraisal, presenting strong, factual evidence increases the chances of a revised valuation.
Consider a Second Appraisal
If the original appraisal remains unchanged despite your dispute, you may want to order a second appraisal. However, this option comes with additional costs, and lenders aren’t always required to accept a new valuation.
Before going this route, weigh the potential benefits against the expense. A second appraisal could be worthwhile if the first was clearly flawed or if a higher valuation would significantly impact your loan terms.
Some lenders may allow you to switch to a different appraiser within their approved network. While there’s no guarantee the second appraisal will come back higher, it could offer a fairer valuation if the first one contained major errors.
File a Complaint if Discrimination is Suspected
If you believe your home was appraised unfairly due to bias, you have the right to file a complaint. Discrimination in home appraisals is illegal under federal law, but studies have shown that appraisal bias can still occur.
If your home was appraised lower than similar properties in the same area, or if the appraiser made inappropriate comments related to race, ethnicity, or neighborhood demographics, you may have grounds to challenge the report.
Start by raising concerns with your lender and requesting a review. You can also file a complaint with the Consumer Financial Protection Bureau (CFPB), the U.S. Department of Housing and Urban Development (HUD), or your state’s appraisal board.
Challenging biased appraisals helps promote fairness in home valuations and ensures all homeowners receive accurate assessments.
Make the Most of Your Home’s Value with the Right Loan
A home's value isn't just one number, it depends on who’s calculating it and why. Market value is what buyers are willing to pay, appraised value is determined by a professional to satisfy lenders, and assessed value affects your property taxes.
If you’re buying, selling, or refinancing, understanding these values can give you an edge. And if an appraisal doesn’t reflect your home’s worth, you have options to dispute it.
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