When it comes to understanding what your home is worth, two terms often come up: market value and assessed value.

They sound similar, but they serve very different purposes. Knowing the distinction between the two can help you make smarter decisions, whether you’re buying, selling, refinancing, or simply keeping an eye on your property’s worth. Here’s what each term means, how they’re calculated, and why they matter.

What is market value?

This is the price a buyer is willing to pay—and a seller is willing to accept—for a home in the current real estate market. In other words, it’s what your home would likely sell for right now. Market value is influenced by several factors, including:

• The home’s location and neighborhood desirability
• Size, layout, and condition of the property
• Comparable recent home sales (known as “comps”)
• Current market conditions, like buyer demand and inventory
• Upgrades, features, and overall presentation

When you work with a real estate agent, they’ll typically perform a comparative market analysis (CMA) to estimate your home’s market value. This helps set a competitive listing price that attracts buyers without undervaluing your property. Because the housing market is constantly changing, market value can fluctuate over time, sometimes even within months.

What is assessed value?

Assessed value, on the other hand, is used by your local government to calculate property taxes. It’s determined by a public tax assessor, not the market. The assessor reviews a variety of factors, like property size, location, construction type, and sometimes recent sale prices, to assign an assessed value to your home. This number is then multiplied by your area’s tax rate (or mill rate) to determine your annual property tax bill.

In many areas, the assessed value is lower than the market value because it’s meant to provide a consistent basis for taxation, not reflect the home’s true selling price. Assessors typically update these values on a regular schedule (often every one to three years) rather than adjusting them in real time with the market.

How the two values work together

While market value and assessed value are different, they can influence each other indirectly. For example, if home values rise significantly in your area, assessors may increase assessed values during their next review cycle to reflect general market growth. However, they’ll never match perfectly. It’s possible for a home’s market value to be much higher or lower than its assessed value, depending on timing, demand, and local tax policies. For homeowners, this means:

• When selling: Market value matters most—it determines your listing price and what buyers are willing to pay.
• When paying taxes: Assessed value matters—it determines how much you owe in property taxes each year.

Why knowing the difference matters

Understanding both values helps you make informed financial decisions about your home. If you’re selling, knowing your market value helps you set the right price and understand your equity position. If you’re buying, looking at assessed values can give you a rough idea of expected property taxes, but it’s the market value that determines what you’ll pay for the home. If you’re a homeowner, monitoring your assessed value ensures you’re being taxed fairly. If your assessed value seems unusually high compared to similar homes in your area, you may be able to appeal it and lower your property tax bill.

For example, imagine these two identical homes in the same neighborhood:

• Home A just sold for $400,000—that’s its market value.
• The county assessor, however, values it at $320,000 for tax purposes—that’s the assessed value.

If the local tax rate is 1.5 percent, the homeowner would owe $4,800 in annual property taxes (1.5 percent of $320,000). If that assessed value were based on the full market value, the taxes would be much higher—$6,000—so you can see why the distinction matters.

Market value reflects what your home is worth today in the eyes of buyers and sellers. Assessed value determines what you’ll pay in property taxes. Understanding both helps you make confident decisions about buying, selling, refinancing, and managing your home’s finances. If you’re ever unsure about your home’s true market value, talk with a trusted real estate agent; they can provide an up-to-date analysis tailored to your neighborhood and current trends. Knowing the numbers behind your home means knowing your investment, and that’s always worthwhile.