When it comes to real property, three numbers get thrown around constantly — market value, assessed value, and appraised value. They all sound similar. They all describe a property's worth in some sense. But they are fundamentally different figures, calculated by different people, for different purposes, and they often disagree with each other by tens of thousands of dollars.
Using the wrong number in the wrong context is one of the most common — and costly — mistakes property owners, attorneys, accountants, and estate planners make. Here's what each one actually means, how they're determined, and when each one matters.
What Is Market Value?
Market value is the most probable price a property would sell for in an open, competitive market — assuming a willing, informed buyer and a willing, informed seller, neither under any unusual pressure to complete the transaction, with a reasonable time allowed for exposure on the market.
This is the definition used in professional appraisal practice, mortgage lending, estate tax law, and most legal proceedings. It is not the highest price someone might theoretically pay for a property. It is not what an optimistic seller hopes to receive. It is the most likely price — based on evidence from comparable sales — that the market would produce under normal conditions.
Market value is dynamic. It changes constantly as comparable sales occur, as interest rates shift, and as broader economic conditions evolve. A property's market value today may be meaningfully different from its market value six months ago.
What Is Assessed Value?
Assessed value is the value placed on a property by the local government's tax assessor for the purpose of calculating property taxes. It is an administrative figure — not a market opinion.
In most jurisdictions, assessed value is expressed as a percentage of market value, called the equalization rate or assessment ratio. In New York, municipalities are supposed to assess properties at a uniform percentage of market value, but in practice, assessment ratios vary significantly across counties, towns, and even individual properties. A property assessed at $420,000 might have a market value of $900,000 — or $700,000 — depending on when it was last reassessed and how the local assessor applies the equalization rate.
Assessed value is set by a government official who typically has not physically inspected your property recently. It relies heavily on town records, prior sales data, and broad valuation models applied across entire geographic areas. It is not intended to reflect what your home would actually sell for today — and it frequently doesn't.
Why Assessed Value Often Lags Behind Market Value
Most jurisdictions reassess properties on irregular cycles — sometimes every few years, sometimes less frequently. In a rising market, assessed values tend to lag behind actual market prices, meaning homeowners may be under-assessed relative to current value. In a falling market, the opposite can occur: assessed values may remain elevated long after market conditions have shifted downward, resulting in property owners paying more in taxes than they should.
This gap between assessed value and market value is precisely why tax grievance appraisals exist. If your assessed value is higher than what the market evidence supports, a certified appraisal can provide the documentation needed to challenge it.
What Is Appraised Value?
Appraised value is a certified professional's opinion of a property's value, typically market value, as of a specific effective date. It is produced by a licensed or certified appraiser following the Uniform Standards of Professional Appraisal Practice (USPAP), based on a physical inspection of the property and analysis of relevant market data.
Unlike assessed value — which is set by a government official applying broad formulas — and unlike market value in the abstract sense, appraised value is a formal, documented, defensible conclusion. It carries the appraiser's professional signature, credentials, and legal accountability. It can be used in court, submitted to a lender, presented to the IRS, or relied upon by an estate attorney.
The appraiser's job is to arrive at a credible estimate of market value (or another defined value type, depending on the assignment). The two concepts — market value and appraised value — are closely related, but appraised value specifically refers to the output of the formal appraisal process.
Why Do These Three Numbers Differ So Much?
Consider a typical scenario in Westchester County. A home's assessed value might be listed at $380,000 on the town roll. A certified appraisal for estate purposes concludes a market value of $875,000. And when the home lists for sale, it trades at $890,000. All three numbers are technically "correct" within their own context — they're just measuring different things.
- The assessed value reflects the town's administrative calculation, likely based on a reassessment done years ago with an equalization rate applied
- The appraised value reflects a certified professional's analysis of actual comparable sales, adjusted for this specific property's characteristics
- The sale price reflects what one particular buyer was willing to pay on one particular day — which may or may not align exactly with appraised market value
Three numbers, three different answers — all valid within their own domain. The mistake is using one when you need the other.
Which Value Matters — And When?
| Situation | Which Value Applies | Why |
|---|---|---|
| Property taxes | Assessed value | Your tax bill is calculated from the assessed value using the local mill rate. Market value only enters the picture when you're challenging the assessment. |
| Challenging your tax assessment | Appraised value (market value) | To grieve your taxes, you need a certified appraisal showing that market value is lower than what the assessed value implies. The appraisal is your evidence. |
| Listing and selling your home | Market value | Pricing a home effectively means understanding what comparable properties have sold for — not what the town assessed it at years ago. |
| Mortgage financing | Appraised value | Lenders require a certified appraisal. The loan amount is based on the appraised value, not a Zestimate or the assessed value. |
| Estate settlement / date of death | Appraised value (market value as of date of death) | The IRS and state tax authorities require a certified appraisal to establish fair market value for estate tax, step-up in cost basis, and asset distribution. |
| Divorce proceedings | Appraised value | Courts require a certified appraisal. An assessed value has no standing as evidence of fair market value in a legal proceeding. |
| Estate planning (living) | Appraised value (market value) | Gifting, trust transfers, and charitable contributions involving real property require a qualified appraisal to satisfy IRS requirements. |
| HELOC / refinancing | Appraised value | The lender's loan-to-value calculation is based on appraised value. A higher appraisal can mean better terms or a larger credit line. |
| PMI removal | Appraised value | Lenders require a new certified appraisal to demonstrate sufficient equity before canceling private mortgage insurance. |
How Appraisers Determine Market Value
Understanding how a certified appraiser arrives at market value helps explain why it's the most reliable figure for legal and financial purposes.
The Sales Comparison Approach
For residential properties, the primary method is the sales comparison approach. The appraiser identifies comparable properties — similar homes that have sold in the subject market within a recent time frame — and makes adjustments to account for differences between each comparable and the subject property. Adjustments are made for factors such as gross living area, lot size, condition, age, features, and the date of sale relative to the effective date of appraisal.
The key is that these adjustments must be market-supported — grounded in what actual buyers and sellers have demonstrated they're willing to pay for differences in features. An appraiser doesn't simply add $50,000 for a renovated kitchen because it seems right; they analyze paired sales to determine what the market actually paid for that upgrade in that market area.
The Cost Approach
The cost approach estimates value by calculating what it would cost to replace the improvements (the structure) with new construction of similar utility, then subtracting depreciation for age, condition, and functional issues, and adding the land value. This method is particularly useful for newer construction and unique properties where comparable sales are limited.
The Income Approach
For income-producing properties, the income approach estimates value based on the property's capacity to generate rental income, capitalized into a value indication. While more common in commercial appraisal, it's sometimes applied to single-family homes with accessory dwelling units or multi-family residential properties.
Reconciliation
After developing one or more approaches to value, the appraiser reconciles the indications into a single, defensible conclusion — the appraised value. The appraiser must explain their reasoning, disclose any limiting conditions, and sign the report under USPAP, certifying that their analysis is objective and credible.
This is fundamentally different from assessed value (calculated by an algorithm applied to tax records) or market value as a general concept (what the market would produce). The appraised value is a professional conclusion, not a data output.
A Common Trap: Relying on Assessed Value for Financial Decisions
One of the most frequent mistakes we see — especially in estate and divorce matters — is someone using the assessed value as a proxy for what a property is worth. An attorney might pull the town's assessment and assume it reflects market value. An accountant might use it to estimate what a property in an estate is worth for distribution purposes. An executor might rely on it to calculate estate taxes owed.
In nearly every case, this is a mistake. Assessed values are not designed to reflect current market value. They lag behind the market, they're applied with equalization rates that vary by jurisdiction, and they don't account for the individual property's actual condition, improvements, or unique characteristics.
When real money, legal proceedings, or tax liability are on the line, there is only one appropriate standard: a certified appraisal of market value.
Frequently Asked Questions
Is appraised value the same as market value?
They're closely related but not identical. Market value is a concept — what a property would sell for under normal conditions. Appraised value is a certified professional's documented conclusion of market value (or another defined value type) as of a specific date. A certified appraisal is the formal process of estimating market value.
Can assessed value be used for an estate or divorce proceeding?
No. Courts and the IRS require a certified appraisal from a licensed professional. Assessed value is an administrative figure for tax purposes only and has no standing as evidence of fair market value in legal or tax proceedings.
Why is my assessed value so much lower than what my home would sell for?
Most commonly because assessments lag behind the market. If your property was last reassessed several years ago and values have risen significantly since then, your assessed value will reflect older conditions. Equalization rates applied by the municipality can also cause assessed values to appear lower than actual market value. This gap doesn't mean you're overpaying in taxes — what matters for your tax bill is how your assessment compares to other properties in the same jurisdiction, not how it compares to sale prices.
Which value should I use to price my home for sale?
Neither the assessed value nor a stale appraisal. For pricing decisions, you want a current market value analysis — either a certified appraisal based on recent comparable sales, or a competitive market analysis from an experienced local professional familiar with current market conditions.
How often does appraised value match the sale price?
In a well-functioning, transparent market with adequate comparable sales, appraised value and sale price typically align closely — often within a few percent. In rapidly appreciating markets, in markets with limited comparable sales, or for unique properties, the gap can be wider. Appraisers are trained to account for market conditions and time adjustments to bridge these gaps.