Home prices are in a dynamic state of flux due to a number of key factors. In real estate transactions, there are two concepts, tax assessed value and market value. Although they appear to be similar, the numbers are different, and the assessed value is usually lower and used for different purposes.

1. What is market value?

Casey Fleming, a former real estate appraiser and author of “The Loan Guide: How to Get the Best Mortgage,” points out that the professional definition of market value is “the most likely price that a particular property might yield in an open market transaction.

In layman's terms, it is the price that buyers are willing to pay and sellers are willing to accept. The market value of a home can be judged from a variety of perspectives:

- Exterior features: These include curb appeal, the condition of the exterior of the home, the size of the lot, the style of the home, and the availability of utilities.

- Interior features: These include the size and number of rooms, the quality of the construction and fixtures, the heating system and energy efficiency.

- Similar Homes Factor: Recent sales prices of similar homes in the same area are very informative.

- Supply and demand: the number of buyers versus sellers in the area.

- The importance of location: the popularity of the neighborhood, schools, crime rate, etc. are all key.

2、What is assessed value?

To understand the assessed value of a property, you need to be clear about the subject and purpose of the assessment. Municipalities (mostly counties) hire assessors to evaluate real estate for property tax purposes. When determining the value for tax purposes, the assessor takes a combination of things into account:

- The selling price of similar properties.

- The value of recent improvements.

- The value of recent improvements. The income that might be generated by, for example, renting out a room in a house.

- The replacement cost of the property in the event of a fire. Once the assessed value of the home is determined, the exemptions for which the owner is eligible are deducted and multiplied by the “assessment rate” (generally 80% - 90%, a flat percentage set by each taxing jurisdiction) to arrive at the taxable value of the property.

For example, if the market value of a home is $200,000 and the local assessment rate is 80%, the taxable value is $160,000, which is the basis for calculating the property tax bill; the higher the assessed value, the more you pay.

3. What is the effect on the home buyer?

While the market value of a home can go up and down dramatically due to local conditions, assessed values usually fluctuate less.

States like Oregon prohibit assessed values from rising more than 3% per year, even if the market value rises more sharply.

If a homeowner's assessment is lower than expected, there is no need to be dismayed; it does not mean that the property is actually worth less.

Assessed value primarily serves property taxes, and the lower it is, the lower the tax bill; while home buyers and sellers are more concerned with market value.

However, assessed value also comes into play when buying or selling a home, as it is public information in real estate records. Sellers can use it to justify the sale price.