Assessed Value vs Market Value: What's the Difference?

When you look at your home, three different numbers might come to mind:

• What you paid for it
• What Zillow says it's worth
• What your county tax bill says it's worth

These rarely match. The Zillow estimate is closer to market value. The tax bill uses assessed value. And what you paid is just a historical data point.

Understanding the difference matters because assessed value is what determines your property tax bill — not what your home would actually sell for. If your assessment seems too high, you may be paying more tax than you should. This guide explains how each is calculated, why they diverge, and what to do about it.

Quick Comparison Table

What Is Market Value?

Market value is the price your home would sell for today if listed on the open market with a reasonable selling period. It reflects what buyers are actually willing to pay and what sellers are willing to accept.

Market value isn't a single number — it's a range. The formal definition (used by appraisers and lenders) is "the most probable price a property should bring in a competitive and open market under all conditions requisite to a fair sale."

How Market Value Is Determined

Three main methods are used:

1. Comparable sales (most common): Look at recent sales of similar homes in your neighborhood. This is what realtors, appraisers, and websites like Zillow use.
2. Cost approach: Calculate what it would cost to rebuild the home today, plus the land value. Used mostly for unique properties or new construction.
3. Income approach: For rental properties, estimate value based on the income the property generates.

What Is Assessed Value?

Assessed value is what your county tax assessor determines your property is worth for the purpose of calculating property tax. It's a legal value, not a market value — and it's almost always lower than market.

Every county has a tax assessor (sometimes called an "appraiser" or "appraisal district") whose job is to value every property in their jurisdiction. They don't visit every home — instead, they use mass appraisal, a statistical method that analyzes thousands of properties at once based on data like:

• Square footage
• Lot size
• Number of bedrooms/bathrooms
• Year built
• Recent sales of similar properties nearby
• Building permits and improvements

The Assessment Ratio

Most states don't tax 100% of a home's market value. Instead, they apply an assessment ratio — a percentage of market value used to calculate the taxable amount.

Examples of state assessment ratios:

• Texas: 100% of market value (with a 10% annual cap for homesteads)
• California: 100% of purchase price + 2%/year (Prop 13)
• South Carolina: 4% of market value for primary residences
• Mississippi: 10% of market value
• Arkansas: 20% of market value
• Connecticut: 70% of market value

This is why a $400,000 home in South Carolina has an assessed value of just $16,000 (4%), while the same home in Texas has an assessed value of $400,000.

Why Assessed Value and Market Value Differ

Five main reasons:

1. Assessment Frequency

Most counties reassess properties every 1-5 years, not continuously. If your area's home values have risen 20% since the last assessment, your assessed value lags behind market by 20%.

2. Statutory Caps

Many states cap how fast assessed value can rise, even if market value spikes. California's Proposition 13 limits annual increases to 2%. Florida's "Save Our Homes" caps homestead increases at 3%. Texas caps homestead increases at 10% per year.

These caps protect long-term homeowners from massive tax hikes during housing booms. The downside: assessed value can fall far below market value over time.

3. Assessment Ratios

As discussed above, many states apply a fixed percentage of market value rather than the full amount.

4. Mass Appraisal Errors

Mass appraisal is fast and consistent, but it misses nuance. The assessor doesn't know your kitchen is outdated, your roof leaks, or your view of the lake has been blocked by new construction. Properties with unique features often get assessed inaccurately.

5. Exemptions

Many homeowners qualify for exemptions that reduce the taxable assessed value: homestead, senior, veteran, disabled. Your assessed value might be $300,000, but after a $25,000 homestead exemption, your taxable value is $275,000.

Real Example: How the Numbers Work

Let's say you own a home in Harris County, Texas:

• Market value (what Zillow says): $350,000
• Assessed value (county appraisal): $310,000 (mass appraisal often runs slightly below market)
• Homestead exemption: -$100,000 (Texas general homestead, 2023+)
• Taxable value: $210,000
• Combined nominal rate: 2.13%
• Annual property tax: $210,000 × 2.13% = $4,473

Notice the gap: a home worth $350,000 produces a tax bill calculated on just $210,000. That's the power of homestead exemptions plus the typical assessment-to-market gap.

How to Find Your Assessed and Market Values

Finding Your Assessed Value

1. Check your property tax bill. It's listed prominently, usually alongside the taxable value and any exemptions.
2. Visit your county assessor's website. Search "[your county] property search" or "[your county] tax assessor." Most counties have online lookup tools where you can enter your address.
3. Look at last year's assessment notice. Counties mail these annually, usually in spring.

Finding Your Market Value

1. Zillow or Redfin estimates: Free starting points, but not precise.
2. Comparable sales: Look at recent sales of similar homes in your neighborhood (3-6 months old, within 0.5 miles, similar size/condition).
3. Realtor opinion: Many will give you a "comparative market analysis" (CMA) for free, hoping you'll list with them.
4. Professional appraisal: The gold standard. Costs $400-$600 but is legally defensible. Required if you're refinancing.

What If Your Assessment Seems Too High?

If your assessed value is higher than recent sales of comparable homes suggest, you can file a property tax appeal (also called a "protest" in Texas). About 30-40% of appeals succeed nationally, with average savings of 10-15% on the assessed value.

Signs your assessment may be too high:

• Similar homes in your neighborhood sold for less than your assessment
• Your home has condition issues not reflected in the assessment
• The assessor's square footage is wrong
• Your bedroom/bathroom count is listed incorrectly
• Comparable homes have lower assessments

Use our appeal calculator to estimate potential savings before filing.

Frequently Asked Questions

Is assessed value the same as appraised value?

Not exactly. Assessed value is set by the county tax assessor for tax purposes. Appraised value is set by a professional appraiser, usually for mortgage lending or buying/selling. They use different methods, though both estimate property worth.

Why is my assessed value so much lower than market value?

Several reasons: your state may use a low assessment ratio (e.g., 4% in South Carolina), statutory caps may limit annual increases (e.g., 2% in California under Prop 13), or your county hasn't reassessed recently. This is generally good for you — lower assessed value means lower tax.

Should I be worried if my assessed value is higher than market value?

Yes — this is unusual and usually means you're overpaying property tax. File an appeal with comparable sales as evidence. About 40-60% of homeowners who appeal an inflated assessment win some reduction.

Does increasing my home's assessed value affect my mortgage?

Generally no, but it affects your escrow. If your assessed value rises, your property tax rises, and your lender will raise your monthly mortgage payment to cover the increased tax. Your actual loan balance and interest rate don't change.

Will renovations increase my assessed value?

Usually yes. Permitted renovations (additions, new bathrooms, finished basements) typically trigger reassessment. Cosmetic upgrades (paint, flooring) generally don't. Pulling permits creates a paper trail that the assessor will eventually see.

The Bottom Line

Assessed value and market value serve different purposes, use different methods, and almost always produce different numbers. For most homeowners, assessed value runs 10-40% below market value — and that's by design. Caps, ratios, and exemptions all work to keep your tax bill predictable.

Two practical takeaways:

1. Don't use assessed value to estimate what your home will sell for. Get a market value estimate from comparable sales or an appraiser.
2. Don't use market value to estimate your tax bill. Use your assessed value (after exemptions) multiplied by your local effective rate — or use our calculator below.