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Whether you’re a homeowner looking to sell your home or are a prospective buyer hoping to get into the real estate market, there are certain key terms you should be familiar with, including “assessed value” and “market value”. Basically, these terms refer to how much a home is worth. 

Since they both involve the value of a home, how do assessed value and market value differ? Read on to find out what each term means and why it’s important to differentiate between the two. 

What Is Assessed Value vs. Market Value?

While both assessed value and market value involve determining how much a property is worth, they each serve different purposes. 

Assessed Value 

The assessed value is used by local governments to determine how much homeowners are required to pay in property taxes. It’s basically the value that property assessors establish before applying the municipality’s assessment rate.

Every city has its own tax rate, which typically changes every year and is based on the cost of paying for services in the community, such as policing, fire departments, road maintenance, and education, among others. 

Municipal tax assessors will evaluate multiple factors when assessing the value of a home. This may include:

  • comparable properties in the area
  • recent improvements
  • the cost to replace the home if it is ever destroyed
  • whether or not the homeowner is collecting rent

The assessed value of the home is then multiplied by the jurisdiction’s tax rate. This results in the property tax amount that homeowners must pay every year. 

The higher the assessed value of a home, the more property taxes the homeowner must pay. 

What Is An Appraisal vs. An Assessment?

An assessment and an appraisal may seem the same, but they’re not. In particular, appraisals are used by lenders to determine the value of a home and ultimately decide on a loan amount to offer a borrower. Lenders do not use tax assessments for this purpose. 

Homeowners applying for a mortgage or refinance will require a traditional home appraisal and cannot rely on their tax assessment. Generally speaking, property values assessed for tax purposes are typically lower than appraisals. 

What Is Market Value?

Market value is used by real estate agents, lenders, sellers, and buyers to determine the value of a property for the purpose of estimating how much a home is worth based on current market conditions. Essentially, the market value represents a price that a qualified buyer would be willing to pay for a specific home today.  

How Do Real Estate Agents Use Market Value? 

Real estate agents typically use the comparative market analysis method to estimate the current value of a property, though there are other methods available. With the comparative market analysis tactic, agents compare similar homes in the vicinity of the subject property that have recently sold. They then use the sale prices of these properties to come up with a competitive listing price for the home they’re selling. 

Buyer agents also use the market value of a home to determine a fair offer price. 

How Do Lenders Use Market Value? 

Lenders typically hire professional home appraisers to determine the market value for homes when homebuyers apply for a mortgage to finance the properties. That way, lenders are assured that they’re not loaning out more than what the properties are worth. 

What Is Fair Market Value vs. Market Value?

Fair market value refers to the highest price a home could sell for in an open housing market between a seller and buyer who have all the information needed to make an informed decision. Ultimately, it’s the buyer or seller who determines the fair market value of a home. 

Market value, on the other hand, is determined by the real estate agent or appraiser. It refers to the price a home should sell for based on current market conditions. 

How Your Market Value Affects Your Home Equity

The difference between your current home value and your outstanding mortgage is referred to as your home equity. As such, the more your home is worth, the more equity you have available to you. 

Ways You Can Access Your Home Equity 

There are a couple of loan products you can use to tap into your home’s equity, including the following:


A home equity line of credit (HELOC), is a revolving credit that is collateralized by your home. With this type of financing, you can borrow up to a certain amount against your home’s equity and withdraw from the account on an as-needed basis. Rather than paying interest on the full credit limit, you’ll only be charged interest on the withdrawn amount.   

HELOCs work very similarly to credit cards, where money can be withdrawn up to a set credit limit and repaid on demand. These are generally given out to individuals with a good credit standing and history. 

HELOCs also remain open only for a specific term, referred to as the “draw” period. During this period, you can withdraw as much or as little as you want from your home’s equity. Once the draw period ends, the loan is amortized and payments including both principal and interest are required. 

Home Equity Loans

A home equity loan also uses your home’s equity to back the loan. It provides you with a lump sum of money that you can use to cover a variety of expenses. Like a typical loan, you’ll then be required to make regular payments to repay the loan, including principal and interest components. 


How Much Can You Borrow?

In Canada, you can borrow up to 80% of your home’s appraised value on a home equity loan, minus the outstanding balance on your first mortgage. On a HELOC, you can borrow no more than 65% to 80% of the appraised value of your home, minus the outstanding balance on your first mortgage.  

Let’s assume your home is currently valued at $600,000 and you have a remaining balance of $250,000 on your mortgage. The maximum amount you can borrow on a home equity loan would be calculated as follows: 

$600,000 (property value) x 80%(maximum borrowing capacity) – $250,000 (outstanding loan amount) = $230,000 (max amount you can borrow)

In the above example, the most you could borrow from your home’s equity is $280,000, assuming you’re allowed to borrow 80%. 

Where Can You Get A Home Equity Loan? 

If you don’t know who you can qualify with, check your credit score before applying and use the services of a mortgage broker like Maestro to help you find a lender. 

Mortgage brokers like Maestro work with several banks and alternative lenders. So they can help you find the best loan offers based on your finances and credit history. Unlike traditional banks, mortgage brokers work on your behalf to compare loan offers from many different lenders to ensure you’re getting the best deal.

How To Find Your Home’s Assessed Value vs. Market Value

If you’re curious about what your home is worth, you may want to find out both its assessed value and market value and compare the two. As mentioned, assessed values tend to be slightly lower than market values. 

Assessed Value

To find out what your home’s assessed value is, refer to your property tax statement. This statement will detail how much you owe in taxes for the year and the current assessed value of your home. 

Market Value

To determine your home’s market value, consult with a professional appraiser or real estate agent who will perform an appraisal on your home based on current market conditions. The appraiser will look at several factors that will impact how much your home is currently worth.  Such as square footage, the age of your home, construction materials, condition of the home, architectural features, and the number of bedrooms and bathrooms, among others. The cost to hire an appraiser ranges from $300 to $500, though it could be slightly more in more expensive locations. 

What If You Don’t Agree With Your Home’s Value? 

If you believe that the results of an appraisal or tax assessment don’t accurately reflect the true value of your home, there are a few things you can do: 

Get Another Opinion 

It’s possible that the appraiser made some mistakes when assessing the value of your home. If that’s the case, consider hiring another one to conduct an appraisal. Just keep in mind that you’ll have to foot the bill for a second appraisal, which will cost you a few hundred dollars. 

Do Some Homework On Your Own

There’s nothing wrong with doing some of your own research. For instance, you could look into homes in your neighbourhood that have sold over the past 3 months. Make sure they closely match the size and features of your home. 

Find out what they sold for, and if the numbers are way off what your appraiser came up with, inform the appraiser or your lender and request another appraisal. 

Challenge Your Property Tax Bill

If it’s your tax assessment that you have a problem with, you can dispute it. You may have to pay a filing fee to contest your property tax bill, as well as a lawyer to help guide you along the way. A board will review your case and determine whether or not they approve your claim. If they do, the assessed value of your home will be reduced accordingly.

How Does The Assessed Value Affect Your Property Taxes?

The assessed value of your home has a direct impact on how much you pay in property taxes. The other component that determines your tax payment amount is the tax rate in your area. Your property taxes are calculated by multiplying your home’s assessed value by the tax rate in your location. So, the higher your home is assessed at, the more you’ll pay in property taxes. 

Final Thoughts

Knowing the value of a home is helpful when you’re planning to buy, sell, or take out a mortgage. It can also help determine how much you owe in property taxes. Your home’s appraised value, market value, and assessed value are all connected but differ slightly. Ultimately, a home’s appraised value is determined by a professional appraiser, the market value is decided by buyers, and the assessed value is determined by the government and affects how much you pay in property taxes.

Market Value FAQs

Do market value and assessed value affect each other? 

While market value and assessed value serve two different purposes, they are associated with each other to some degree. For instance, when selling a home, real estate agents may use the assessed value of a home as part of their marketing efforts. Similarly, tax assessors may consider the market value of a home when coming up with a listing price. 

How long does it take to conduct an appraisal?

The length of time it takes for appraisers to conduct a home appraisal varies depending on the size and condition of the home. Its features and any nuances that aren’t common in the neighbourhood. Generally speaking, appraisals take a few hours to do, but appraisers need at least another few days to a couple of weeks to provide a final written report. 

How much more should you pay over the assessed value for a home?

As mentioned, the assessed value of a home is usually lower than the market value. You should use the market value of a home to determine how much you pay for it. Rather than depending solely on the assessed value. That said, you may have some negotiating power if there’s a big gap between the assessed value and the market value of a home.

Is the appraised value of a home typically higher than the market value?

This depends on the real estate market at the time of the valuation. An appraisal is based on recent sale prices of homes in the same area as the subject property, as well as other factors. Market value, on the other hand, is decided by buyers, who determine how much they are willing to pay for a home. In a hot market, it’s more common to see a higher market value on a home.
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