What Is the Difference in the Tax Appraised Value of Property & Market Value?


If you are a homeowner, you may have observed that two different “values” of your house are utilised for a number of official reasons. These “values” are used to determine things such as property taxes and insurance premiums. The terms “fair market value” and “tax appraised value” are commonly used to refer to these two types of appraisals of a property. These assessments may be completely identical to one another or they may vary by a sum that is many thousands of dollars, depending on the state and county in which the values are computed.


The amount of annual property taxes that a homeowner is required to pay is determined by a tax appraisal, while the fair market value of a house is used to determine how much a buyer and seller should expect to sell or pay for a home.

determining what the fair market value is

The amount of money that a buyer, seller, or lender ought to anticipate a house or piece of property to sell for is referred to as the home’s or property’s fair market value. An formal evaluation of the property is what decides the amount to be paid. In most cases, the appraiser will evaluate the home based on how it compares to other comparable homes in the neighbourhood that have been sold during the last six months to one year. The appraiser then takes into account the specific assets and liabilities associated with the property (for example, a property fence is typically considered an asset, whereas having only one full bathroom in a home with multiple bedrooms is typically considered a liability), and adjusts the value of the property accordingly.

The Property Tax Assessor Cometh

The number known as a house or property’s tax assessed value is one of the factors that county tax offices consider when calculating the amount of yearly property tax that will be owed by its owner. The money that is collected from citizens’ property taxes is used to pay for the county to provide fundamental services to them (such as fire and police protection and the upkeep of roads), such as these: Occasionally, local tax levies (such as those for schools or county disability boards, for example) are added to property taxes; however, in order for this to occur, homeowners will first be required to provide their approval for the levy by a vote of simple majority in a local election.

If your state has a homestead exemption, the appraised value of your property will be lower than it would be in other parts of the nation, where the tax appraised value of a property is calculated as a direct proportion of the property’s fair market value. A few of the counties’ rates are subject to yearly increases that are calculated using an inflation index. In addition, since counties have to pay for property tax reappraisals, they typically only have them done once every five or ten years, or when a property is sold. The exception to this is when a property is being transferred between owners. In the San Francisco Bay Area, the assessed value of your house for property tax purposes will be equal to the home’s actual worth on the market. This indicates that the whole value of your property will be used into the calculation of your yearly property taxes.

Understanding California’s Proposition 13

In California, the method used to determine a property’s tax appraised value differs from that used in the majority of other jurisdictions. The passage of Proposition 13 in 1978 placed strict limitations on both the amount of property taxes and the amount of property tax increases. The state of California has decided that the tax appraised value of a property will be equal to one hundred percent of the property’s fair market value, and the yearly tax payment for an owner will be equal to one percent of the fair market value. This results in a property having a tax appraised value of the same amount as its fair market value, which results in an annual property tax of $2,500 for a home with a value of $250,000.

A additional stipulation of Proposition 13 stipulates that the annual rise in property tax cannot be more than two percent, which ensures that a property owner will not see a significant spike in the amount of property tax they are required to pay from one year to the next. This indicates that even if the value of a house increases by an incredible amount from one year and the next, the property tax may only go up by a little amount. The only time this rule is ever broken is when a house is sold to a new owner who is neither the seller’s spouse nor a member of their immediate family. After a property has been sold, the tax assessed value of the property is readjusted to equal one hundred percent of the property’s current fair market value.

Reasons for a Fair Market Value Appraisal

If you are going to sell your home, you need to have a good idea of what a reasonable asking price would be. This will be determined by an evaluation of the property’s fair market value. When you are purchasing real estate, the financial institution that will be providing the mortgage will require you to have an appraisal carried out by a qualified professional appraiser. This is done to ensure that the value of the property justifies the amount of money that will be loaned against it. In a similar vein, if you want to refinance your mortgage, get a home equity loan, a home equity line of credit, or a business or cash loan where the property will be placed as collateral, the lender will likewise want an appraisal from a qualified specialist.

Reasons for a Tax Appraised Valuation

The amount of property tax you pay is proportional to the property’s worth on the open market. If the state of the local housing market has caused a decline in the value of your home, you should consider having your property tax adjusted so that it more accurately reflects this change. In addition, if a natural catastrophe caused damage to your property that was more than $10,000, you may be eligible for a reduction in the amount of property tax you have to pay. In order to provide evidence for this claim, a new valuation of the property is required.