A common misconception in the housing market is the differences between appraised, assessed and market values of a residential property. Homeowners should be familiar with these home values as they have a major impact on the amount of Texas property taxes one is responsible for on their home. 

It is important to understand the differences between an appraised value, assessed value, and market value.

Appraised Value

The appraised value of a home is the value an appraiser determines is the fair market value of the home, taking into account the current condition and market among other factors. In the context of property taxes, the appraisal district uses a method of mass appraisal to determine what a certain property is worth. Since the appraisal district doesn’t have time to visit each individual property, it identifies properties with similar characteristics and assigns them what they deem to be a fair appraisal value.

Market Value

The market value of a home is the fair price of a home-based on its current market conditions. It is what the property would sell for between a buyer and seller under no duress to purchase or sell. This value is determined by seeing what comparable homes have recently sold for within an area similar to where the home is located.

According to the Texas State Comptroller Market value is the price at which a property would transfer for cash or its equivalent under prevailing market conditions if:

• it is exposed for sale in the open market with a reasonable time for the seller to find a purchaser;
• both the seller and the purchaser know of all the uses and purposes to which the property is adapted and for which it is capable of being used and of the enforceable restrictions on its use; and
• both the seller and purchaser seek to maximize their gains and neither is in a position to take advantage of the exigencies of the other.

Assessed Value

Also referred to as the “Capped Value'', the tax assessed value of a home is the lower value resulting from exemptions or limitations on taxable value increases for homestead properties that are unique to an appraisal district. The assessed value is the value your taxes are calculated off of. You can find the assessed value of a property through your county website.

Your home’s assessed value may not be its fair market value. Instead, it comes from the local tax collector’s office that takes in all mitigating factors on a property’s taxable value. The assessed value is used to determine the property tax that is assigned to a particular home.

Bottom Line

When it comes to property tax evaluation, the assessed value of your property is the gold standard for how your property taxes are calculated. While the market value of your property factors into the amount of taxes you will pay on your annual tax bill, the final assessed value is the only value that ultimately matters. In our experience, fighting for a reduction in your market value will strongly correlate to a reduction in your assessed value in the current tax year. If your assessed value is already significantly lower than your current market value, a reduction in market value will help prevent substantial increases in your taxes in future years with little impact in the current taxing year. 

Want to learn more about how your property’s appraised, assessed, and fair market value will affect your property taxes? You can view our list of commonly asked questions here to cover additional topics.