| Who sets appraised value | A licensed or certified appraiser, typically hired by the lender |
| Who sets assessed value | Local government assessor's office |
| Who sets market value | Determined by buyer-seller negotiation and open market activity |
| Primary use of appraised value | Mortgage underwriting and refinancing |
| Primary use of assessed value | Calculating annual property tax bills |
| Primary use of market value | Pricing a home for sale; estimating equity |
| Assessment update frequency | Varies by jurisdiction — annually to every several years |
| Can homeowners appeal assessed value | Yes — most jurisdictions have a formal appeal process |
Why Three Different Values Exist for the Same Property
Ask what your home is worth and you might get three entirely different answers depending on who you ask — a licensed appraiser, your county tax office, or a buyer browsing listings. None of those answers is wrong. They're each designed to answer a different question, and confusing them can lead to real financial mistakes: overpaying taxes you could appeal, misreading your equity position, or entering a mortgage negotiation with flawed expectations.
| Who sets appraised value | A licensed or certified appraiser, typically hired by the lender |
| Who sets assessed value | Local government assessor's office |
| Who sets market value | Determined by buyer-seller negotiation and open market activity |
| Primary use of appraised value | Mortgage underwriting and refinancing |
| Primary use of assessed value | Calculating annual property tax bills |
| Primary use of market value | Pricing a home for sale; estimating equity |
| Assessment update frequency | Varies by jurisdiction — annually to every several years |
| Can homeowners appeal assessed value | Yes — most jurisdictions have a formal appeal process |
Understanding which number applies to which situation is one of the more practical pieces of financial literacy a homeowner can have. It also becomes essential when you're refinancing, disputing a tax bill, or deciding whether to sell.
Appraised Value: What a Lender Needs to Know
Appraised value is a professional opinion of a property's worth, produced by a licensed or certified appraiser — typically on behalf of a mortgage lender. It exists primarily to protect the lender: before issuing a loan, a bank needs to confirm the home is worth at least what it's lending you.
Appraisers use a method called the sales comparison approach for most residential properties, identifying recently sold homes with similar size, condition, age, and location — known as comparables, or "comps" — and adjusting for differences. They also physically inspect the property and note condition, updates, and any deficiencies that could affect value.
Appraised value is tied to a specific date and purpose. An appraisal done for a purchase mortgage may differ from one ordered during a refinance six months later, simply because market conditions shifted. It's also important to note that appraisers are human professionals exercising judgment; two appraisers may produce slightly different numbers for the same home. For a deeper look at what exterior presentation signals to appraisers, see how curb appeal factors into appraisals.
Assessed Value: The Number Your Tax Bill Is Built On
Assessed value is assigned by a local government assessor — not an independent professional hired for your transaction — and its sole purpose is to calculate your property tax obligation. It is not designed to reflect what your home would actually sell for.
Most jurisdictions calculate assessed value as a percentage of estimated market value, called the assessment ratio. If a county uses an 80% ratio and your home's estimated market value is $400,000, your assessed value would be $320,000. Multiply that by the local mill rate (the tax rate per $1,000 of assessed value), and you arrive at your annual tax bill.
Assessments are typically updated on a fixed cycle — sometimes annually, sometimes every few years — which means they often lag behind actual market conditions. A home that has appreciated sharply may carry an assessed value well below current market reality, or one in a declining market may be over-assessed relative to what it would actually sell for. That gap matters, because you have the right to appeal an assessment you believe is too high. Understanding your property tax assessment is the first step toward knowing when a challenge is worthwhile.
Market Value: What a Willing Buyer Would Actually Pay
Market value — sometimes called fair market value — is the price a reasonably informed buyer would pay a reasonably motivated seller in an open, competitive market, with neither party under pressure to transact. It's the most fluid of the three numbers, shifting in real time with supply, demand, interest rates, local economic conditions, and neighborhood trends.
Market value is most often expressed as a listing price set by an agent or a final sale price agreed upon by buyer and seller. Automated valuation models (AVMs) — the estimates you see on listing sites — attempt to approximate it using algorithmic analysis of recent sales and public records, but they can miss condition-specific factors or be slow to reflect local shifts. They're useful starting points, not authoritative figures.
Market value is also what drives real equity calculations. If you owe $250,000 on a mortgage and the realistic sale price of your home is $380,000, your equity is approximately $130,000 — regardless of what the county assesses it at. For a broader view of how location type shapes market value trajectories, comparing urban, suburban, and rural property values offers useful context. And if you've encountered assumptions about what boosts market value, many popular beliefs about home values don't hold up under scrutiny.
Putting All Three Numbers to Work
Each value type has its proper lane. Use the right number for the right purpose:
- Refinancing or buying? The appraised value is what the lender uses — and if it comes in below the purchase price, you may need to renegotiate or bring additional cash to closing.
- Disputing your tax bill? Focus on assessed value and your jurisdiction's assessment ratio. Gather recent comparable sales to argue that your assessment is too high relative to actual market conditions.
- Estimating equity or planning a sale? Market value — informed by recent comparable sales and ideally a professional comparative market analysis (CMA) from a licensed agent — is the number that matters.
None of these numbers is universally "correct." They each answer a specific financial or administrative question. Homeowners who recognize this distinction make better decisions at every stage of ownership.
This article is for general informational and educational purposes only and does not constitute financial, legal, or tax advice. Consult a licensed real estate professional, tax adviser, or attorney for guidance specific to your situation.