Understanding Market, Assessed, and Appraised Values

Every homeowner knows that property taxes are a significant expense, but not everyone understands the different values that affect this cost. During protest season, terms like "Market Value," "Appraised Value," and "Assessed Value" become particularly important. Understanding these can have a significant impact on your future tax bills.

Understanding Market Value, Assessed Value, and Appraised Value

"Market Value" refers to the amount your property would likely sell for under normal conditions on January 1st of the tax year. "Assessed Value," on the other hand, is the value assigned by your county appraiser for the purpose of calculating your property taxes. "Appraised Value" is used inconsistently. On some documents, it refers to the Market Value, but other times it actually means your Assessed Value. It's important to be clear which value is being discussed when you protest since they impact the amount you owe each year in different ways and are crucial in managing your property tax responsibilities.

Why Your Market Value Matters

Each year, the county calculates two important numbers: how much they believe your home is worth on the open market (Market Value) and how much you should be taxed on after applying any exemptions (Assessed Value). When you protest your property taxes, you’re actually contesting the Market Value before any exemptions are applied. This is crucial because, while exemptions apply to you personally and can reduce your taxable value, they don’t change the underlying Market Value of the property—which can continue to increase and is never limited by exemptions.

Case Study: The Impact of Not Protesting

Consider the impact of not protesting your Market Value. Regardless of realities in the real estate market, homeowners commonly see county appraisals increase every year. Protesting might not save money immediately but can prevent long-term financial strain. Here's why:

With the Homestead cap, this homeowner's Assessed Value (aka $411,598) can only increase by 10% each year. But since the property value (aka Market Value, $506,380) is so much higher, they're almost guaranteed to see a 10% increase in their tax bill for at least the next 2 years.

The Importance of Protesting Your Property Tax Appraisal

Here’s why protesting is essential: most exemptions, including the Homestead, only limit increases to your Assessed Value (e.g., Homestead caps increases at 10% year over year). However, if your property’s Market Value is much higher, you will see increases every year in the tax bill until the Market and Assessed are equal.

Until the Assessed Value catches up with the Market Value, your tax bill will continue to increase. By protesting, you can close that gap and protect yourself from ongoing increases.

How to File a Protest Effectively

To file a protest and win, gather evidence that supports a lower Market Value than the one appraised by your county. This might include discrepancies in the county's evidence, recent sales data of comparable homes, sets of similar properties with lower appraisals, and other factors that affect value like property damage. Comparables must be properly adjusted according to tax guidelines to account for square footage, sales timing, and other differences from your property. Most homeowners must submit their protest before the May 15th deadline each year.

Understanding and actively managing your property's Assessed and Market Values are crucial in controlling your tax obligations. By familiarizing yourself with these concepts and taking action to protest unfair valuations, you can save a significant amount on future tax bills.

If you are ready to challenge your property tax assessment, but are unsure where to start when it comes to gathering or adjusting evidence, get a free Opinion of Value based on real properties in your area and start the protest process today. Don’t wait— if you miss the deadline to file your value is finalized and you can't protest until the following year.