What is the difference between assessed value and market value?

The distinction between assessed value and market value is fundamental in property assessment and taxation. Assessed value refers to the valuation of property as determined by a local tax assessor for the purpose of taxation. It is often a percentage of the market value, which is the price that a property would likely sell for on the open market under normal conditions.

The assessed value is typically set at a fractional amount of the property’s market value, which means it can be lower than what the property could realistically sell for. This fraction can vary significantly from one jurisdiction to another, influenced by local tax policies. The primary use of the assessed value is to allocate property taxes.

Meanwhile, market value is influenced by factors such as supply and demand, property condition, location, and comparable sales in the area. It represents the price that a willing buyer and seller would agree upon in an open and competitive market.

Therefore, the choice that states assessed value is used for taxation and may be lower than the market value accurately reflects the relationship between these two concepts. This understanding is crucial for property owners, assessors, and any stakeholders involved in the real estate market, as it helps them navigate the implications of property taxation and market transactions.