What Is Market Value
Market value is the price a property would sell for under normal market conditions between a willing buyer and seller, neither under pressure to buy or sell. In property tax assessment, assessors use market value as the foundation to calculate your assessed value, which directly determines your tax bill.
Market Value in Tax Assessments
Assessors arrive at market value using three primary appraisal methods. The sales comparison approach analyzes recent comparable sales of similar properties in your area to establish a baseline value. The cost approach calculates replacement cost minus depreciation plus land value, commonly used for new construction. The income approach applies to rental properties and commercial real estate, dividing annual net operating income by a capitalization rate.
Most jurisdictions require assessors to update property values annually or every three to five years. Your assessed value should not exceed a certain percentage of true market value, called the assessment ratio. For example, if your state's assessment ratio is 100%, your assessed value should equal the appraiser's estimate of market value. If it's 50%, your assessed value should be 50% of market value. Some states cap assessment ratios at 33% or lower.
Using Market Value in Board of Review Hearings
When you appeal your assessment, the board of review examines whether the assessed value reflects current market value. You strengthen your case by presenting comparable sales data from the past 12 months, showing properties similar to yours that sold for less. Comps should match your property's characteristics: square footage, condition, lot size, year built, and location within the same school district or neighborhood.
If the assessed value exceeds what comparable properties sold for, you have evidence of overassessment. A professional appraisal carries significant weight in appeals, though it costs $300 to $600. If recent sales in your area show declining values but the assessor hasn't adjusted downward, document this trend with MLS data or county records.
Market Value vs. Similar Concepts
Fair market value and market value are often used interchangeably in assessments, though fair market value adds the condition that both parties have reasonable knowledge of relevant facts. Assessed value is what the assessor determines and what your taxes are based on, which may differ significantly from actual market value if the assessment is outdated or incorrect.
Common Questions
- Does the assessor's estimate of market value determine my tax bill? No. The assessed value, which is usually a percentage of estimated market value, determines your bill. If your assessment ratio is 50%, your taxes are based on half the estimated market value.
- How recent should comparable sales be? Sales from the past 12 months are most relevant. Sales older than 18 months become less convincing unless market conditions were stable during that period.
- Can I use online property estimate tools as evidence? Zillow and Redfin estimates are not accepted in formal appeals. County assessor records, MLS data, and professional appraisals carry weight with the board of review.