What Is the Purpose of Assessed Value?

October 9th, 2023  / Author: Cesar Gomez
Costs and Taxes

Upon buying a house, there are many homeowner’s responsibilities that await you. One of the most important things that you will need to pay alongside your mortgage is property tax. You might wonder what will determine how much property taxes you’re going to pay. The short answer is - the assessed value determines it.

Here, we will go in-depth about the assessed value and property taxes. This article will help you understand four important things:

  • What determines your property taxes?
  • What is an assessed value?
  • How are property taxes calculated?
  • What is the difference between market value and the assessed value of the property?

An assessed value is a figure used to determine how much property taxes should pay. Property owners are required to file tax returns every year based on the assessed values of their homes and businesses. These figures are determined by local governments and are updated annually.

Assessments are performed by trained professionals called assessors. They use information about the land, buildings, improvements, and personal property owned by a taxpayer to calculate the total value of the property.

A property owner can appeal an assessment within one year of receiving notice of the amount owed. If the appeal is successful, the original assessment is replaced with another number.

Who Decides on the Assessed Value?

The assessed value of a home is what it costs to build the same structure today. There are different ways to find out the assessed value of a home. One way is to look up the assessed value online. Another way is to call the local tax office and ask how much the home is worth.

A tax assessor is a government official who serves on a county level. Assessors are either appointed or elected, depending on the state. They work on establishing the value of any type of taxed item, but here we are focusing on their role in property taxes.

Property tax can vary depending on the county and state, but all tax assessors work similarly when determining your annual payment against the property. They multiply the fair market value (how much you paid for the home) and the assessment ratio. Then they multiply that number by the local millage rate, which is around 1%-2%.

Assessed Value Vs. Market Value

If you're selling your home, knowing its market value is important because it helps you decide whether to list it for sale at a price that's too high or low. If you want to buy a home, it's useful information because it tells you how much money you could spend on a home without breaking the bank.

The assessed value of the property might not be as important for you when you’re buying a house because it does not affect your offer or the asking price. However, many factors affect the actual market value of a home. For example, the age of the building, the size of the lot, the quality of construction materials, and the neighborhood all play into what a home is worth today.

We mentioned the assessor, a local government official that determines your annual property tax. Note that an assessor is not the same as a professional appraiser.

The assessed value is the amount of tax you owe on a home. This number is based on the county where the house is located and what type of property it is. For example, an owner-occupied single-family residence is taxed differently than a commercial building. An assessed value is usually different than the fair market value because many factors go into determining the latter.

An appraiser will look at the current condition of your home and compare it to similar properties in the area. They'll consider things like the size of the rooms, the layout, the style, and the overall condition of the home. Based on those comparisons and the current market conditions, they'll come up with an estimate of the home's market value.

Fair Market Value

The appraised value is the amount of money a lender will lend you based on the current market value of the property. You can use this figure to determine whether you can afford to make monthly payments on a mortgage loan.

Fair market value is slightly different from the appraised value, in a sense that it is a price accomplished in reality. It is the price that the seller and the buyer agreed on.

In some cases, the assessed value of your home might differ from the actual selling price. This happens because the assessors use different methods to estimate the value of homes. For example, they might rely on recent comparable sales rather than looking at the overall trend of prices over time. Or they might include improvements you've made to your home, like adding a deck or installing solar panels, even though those changes aren't reflected in the sale price.

How Are Property Taxes Calculated?

The effective property tax is calculated based on the following formula:

Effective Tax Rate Fair Market Value x Assessment Ratio x Millage Rate

Fair Market Value – The amount you paid for the home, plus any improvements. This number is usually determined by the county assessor’s office.

Assessment Ratio – A percentage used to determine the actual value of the home. Typically, it’s around 80%.

Millage Rate – The local tax rate. This number varies depending on where you live.

If you're buying a home, you'll want to make sure the assessed value isn't too high or low. A large discrepancy between the assessed value and the selling price could mean a big difference in your final property tax bill.

If you're considering selling your current home, you'll want the assessed value to match the asking price. Otherwise, you risk getting less than you deserve. Although the taxes differ in each county, Californians can rely on multiplying their property’s value by 1.25% as a tax estimate.

Can My Property Get Re-assessed?

An assessor can reassess your property taxes once every one to five years, depending on the location of your property. They will determine the worth by either comparing it with similar properties in your area or calculating how much you can earn from it if you decide to rent it. Another effective way to assess the property value is to calculate how much money it would take to build it today.

Moving to a Place With Lower Property Taxes?

There is no way to avoid property taxes. Especially if you took a mortgage to finance the purchase of your property - property taxes are a part of your homeowner’s escrow account, and you are paying it monthly. The only thing you can do is choose a location of your property, so you can pay as little as possible.

If you want to sell your house in Riverside, the county with one of the highest property taxes in California, and move elsewhere - contact SleeveUp Homes. We will buy your home and offer top dollar for it.

You don’t need to go through all the hassle of open houses, agent fees, and preparations. We will buy your house as-is, so no need for repairs and paint jobs. If you like what you’ve learned here, request an offer and ensure the best price for your property.



If you want to sell fast and are worried about how long the traditional process takes, and the commission and fees involved, consider working with SleeveUp Homes.