ASK THE EXPERT: Learn about appraised value, assessed value & market value?

Guest Editorial by Vienna Laurendi

THE QUESTION: ‘What are the differences between appraised value, assessed value, and market value?’

This is an excellent question and one I’m asked frequently by both home buyers and home sellers. These three terms sound interchangeable, but they serve very different purposes – and confusing them can lead to unrealistic expectations, frustration, or poor decision-making during a real estate transaction.

THE SHORT ANSWER:

Market value is what a buyer is willing to pay and a seller is willing to accept in today’s market. Appraised value is a professional opinion of value used by a lender to support a mortgage. Assessed value is a number assigned by a municipality for the purpose of taxation. They are related, but they are not the same – and they are not meant to be.

IN GREATER DETAIL:

•Market value: Market value is the most fluid of the three. It is determined by supply and demand, buyer motivation, seller motivation, interest rates, location, condition, and comparable recent sales. Market value can change quickly – sometimes month to month or even week to week – especially in a competitive or rapidly shifting market. Ultimately, market value is established when a meeting of the minds occurs between a buyer and a seller and a contract is signed.

•Appraised value: An appraisal is ordered by a lender after a buyer and seller have agreed on a price. The appraiser is a licensed, independent third party whose job is to protect the bank – not the buyer and not the seller. The appraiser analyzes comparable sales, the subject property’s condition, size, features, and location to determine whether the agreed-upon price is supported by recent market data. If the appraised value comes in at or above the purchase price, the lender is satisfied. If it comes in lower, the transaction may require renegotiation, additional cash from the buyer, or a reconsideration of value.

•Assessed value: Assessed value is determined by the local municipality and is used to calculate property taxes. It is often based on mass appraisal techniques and may lag behind current market conditions. Some assessed values are updated annually; others less frequently. Importantly, assessed value is not designed to reflect what a home would sell for today. It exists solely to allocate the local tax burden among property owners.

ITS ALL IN YOUR PERSPECTIVE:

Homeowners are often surprised when their assessed value doesn’t match their home’s market value – or when an appraisal doesn’t land exactly at the contract price. That disconnect can feel unsettling, but it’s normal. Each value serves a different audience with a different goal. The market focuses on buyer behavior, the appraisal focuses on lender risk, and the assessment focuses on taxation fairness. No single number tells the whole story.

THE SILVER LINING:

Understanding these differences puts you in a position of strength. Sellers who understand market value price their homes more effectively. Buyers who understand appraised value are better prepared for potential hiccups during financing. Property owners who understand assessed value are better equipped to question or challenge their tax assessments when appropriate. Knowledge reduces stress – and stress is often the biggest enemy in real estate transactions.

ONE LAST THOUGHT:

If you are buying or selling a home, market value is the number that matters most to you. Appraised value matters most to your lender. Assessed value matters most to your tax bill. When each value is viewed in its proper context, the process becomes far less confusing and far more manageable.

Vienna Laurendi is a NYS Associate Real Estate Broker affiliated with Howard Hanna WNY Inc’s Laurendi Home Selling Team on Grand Island and is an executive director for the Buffalo Niagara Association of REALTORS. You can email your real estate questions to her at Vienna@Laurendi.com or call/text her at 716-4-Vienna (716-484-3662).

This article is an opinion piece that was written with the support of A.I.