The Difference Between Assessed Value and Appraised Value

One of the most common questions we hear is, "Why is my tax assessment different from my appraisal?" Understanding the difference between assessed value and appraised value is crucial for homeowners, especially when buying, selling, or appealing property taxes.

## What Is Assessed Value?

Assessed value is the value assigned to your property by the local tax assessor for property tax purposes. This value is used to calculate your annual property tax bill.

### How Assessed Value Is Determined

Tax assessors typically use mass appraisal techniques:

- **Computer Models** - Automated valuation models based on property characteristics
- **Sales Data** - Recent sales in the area
- **Physical Inspections** - Periodic drive-by or interior inspections
- **Property Records** - Building permits, deed records, and other public information

### Assessment Frequency

Most jurisdictions reassess properties on a regular cycle:
- **Annual** - Some areas reassess every year
- **Periodic** - Others reassess every 2-5 years
- **Event-Triggered** - Reassessment when properties are sold or improved

### Assessment Ratio

Many jurisdictions don't assess at 100% of market value. Common assessment ratios include:
- 80% of market value
- 90% of market value
- 100% of market value

**Example**: If your home's market value is $300,000 and your jurisdiction uses an 80% assessment ratio, your assessed value would be $240,000.

## What Is Appraised Value?

Appraised value is a professional appraiser's opinion of a property's market value as of a specific date. This value is used for:

- Mortgage lending
- Refinancing
- Estate settlements
- Divorce proceedings
- Tax appeals
- Legal disputes

### How Appraised Value Is Determined

Professional appraisers use three approaches:

**Sales Comparison Approach**
- Analyzes recent sales of similar properties
- Makes adjustments for differences
- Primary method for residential properties

**Cost Approach**
- Estimates land value
- Calculates replacement cost of improvements
- Deducts depreciation
- Used for unique or new properties

**Income Approach**
- Analyzes potential rental income
- Applies capitalization rates
- Primary method for investment properties

### Individual Property Analysis

Unlike mass appraisals, individual appraisals involve:
- Physical inspection of the property
- Detailed measurement and photography
- Analysis of specific features and condition
- Comparison to hand-selected comparable sales
- Written report with supporting documentation

## Key Differences

### Purpose

**Assessed Value**: Taxation
**Appraised Value**: Market transactions, lending, legal purposes

### Methodology

**Assessed Value**: Mass appraisal using automated models
**Appraised Value**: Individual property inspection and analysis

### Frequency

**Assessed Value**: Periodic (annual or multi-year cycles)
**Appraised Value**: As needed for specific transactions

### Accuracy

**Assessed Value**: Broad estimates for entire neighborhoods
**Appraised Value**: Precise analysis of individual properties

### Legal Standard

**Assessed Value**: Meets local tax code requirements
**Appraised Value**: Meets USPAP (Uniform Standards of Professional Appraisal Practice)

## Why Values Differ

Several factors explain why assessed and appraised values often don't match:

### Timing

Your tax assessment may be based on data from months or years ago, while an appraisal reflects current market conditions.

**Example**: Your 2025 tax assessment might be based on 2023 sales data, but a 2025 appraisal uses current comparable sales.

### Assessment Ratio

If your jurisdiction assesses at less than 100% of market value, your assessed value will be lower than appraised value by design.

### Mass Appraisal Limitations

Automated models can't account for:
- Interior condition and updates
- Functional obsolescence
- Unique features or defects
- Micro-location factors

### Market Volatility

In rapidly changing markets, assessments lag behind current values because they're based on historical data.

## Which Value Matters When?

### Buying or Selling

**Appraised Value** is what matters. Lenders require an appraisal to ensure the property is worth the loan amount.

### Property Taxes

**Assessed Value** determines your tax bill. A low assessed value means lower taxes, but it doesn't reflect market value.

### Refinancing

**Appraised Value** is required by lenders to determine loan-to-value ratio and eligibility.

### Tax Appeals

If you believe your **assessed value** is too high, you can appeal using an **appraisal** as evidence of lower market value.

### Estate Planning

**Appraised Value** is used for estate tax purposes and equitable distribution among heirs.

## Common Misconceptions

### "My Tax Assessment Is My Home's Value"

Not necessarily. Assessed value is for tax purposes only and may not reflect current market value.

### "A Low Assessment Means My Home Is Worth Less"

No. A low assessment means lower property taxes, but it doesn't indicate market value.

### "I Can Use My Tax Assessment for a Mortgage"

Lenders require professional appraisals, not tax assessments, to determine loan amounts.

## Using Assessed Value as a Starting Point

While assessed value isn't market value, it can provide a rough estimate:

**Step 1**: Find your assessed value
**Step 2**: Determine your jurisdiction's assessment ratio
**Step 3**: Calculate estimated market value

**Example**:
- Assessed Value: $240,000
- Assessment Ratio: 80%
- Estimated Market Value: $240,000 ÷ 0.80 = $300,000

This is only an estimate. Actual market value requires professional appraisal.

## When to Get a Professional Appraisal

Consider getting an appraisal if:

- You're buying or selling a home
- You're refinancing your mortgage
- You believe your tax assessment is too high
- You're settling an estate
- You're going through a divorce
- You need to establish value for legal purposes

## Appealing Your Tax Assessment

If you believe your assessed value is too high:

1. **Review Your Assessment** - Check for errors in property details
2. **Research Comparable Assessments** - Compare your assessment to similar properties
3. **Get a Professional Appraisal** - Obtain evidence of lower market value
4. **File an Appeal** - Follow your jurisdiction's appeal process
5. **Present Your Case** - Provide documentation supporting a lower value

## The Bottom Line

Assessed value and appraised value serve different purposes and are calculated differently. Understanding the distinction helps you:

- Set realistic expectations when buying or selling
- Identify opportunities to appeal property taxes
- Make informed financial decisions
- Understand your property's true market value

Need an accurate appraisal for lending, tax appeal, or estate purposes? Contact Black Horn Valuations at (423) 904-6400 for professional appraisal services in Tennessee, North Georgia, and North Alabama.