As my research, there are two criteria on home values. Market Value and Assessed Value. Market Value used between buyer and seller to get agree on sales price and Assessed Value is used to calculate taxes. It is more about between you and government.

Let's assume I found a house 400K (after negotiation) and it assessed value is 330K. And house is move-in condition and worth for it. All the inspections are done soever. At first look assessed values is on my side. Because I will need to pay less taxes in future.

Does it bring any disadvantages in future to have lower Assessed Value against Market Value? Does it effect anything in future while I am selling the home?

  • Usually assessed value by governments is based on the land value only, as you pay your taxes on the actual land not the building. – user9722 Sep 2 '15 at 21:07
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    @GeorgeRenous - Not true in my jurisdiction (Colorado) or many others. Our assessment is based (somewhat loosely) on market value, which includes land and improvements. – Rick Goldstein Sep 2 '15 at 21:55
  • A similar question: [Hidden downsides of real-estate property tax appeal?] (money.stackexchange.com/questions/28196) discusses the effects of changes to the assessed value long after the property is purchased. – Jasper Sep 3 '15 at 0:56

The relationship between assessed value and fair market Value is zero. In some jurisdictions they are in lock step, in other cases they are not. Some places only reassess every three years (Maryland), others every year. Some places also limit the maximum jump is assessed value between re-assessments, others have no limit. In fact in a hot market, or a cratering market, the big change in assessed values may take place next year based on what happened this year.

You need to know what your taxes will be if nothing changes, you also need to ask what the relationship between the two values was in previous years. This is important to estimate how your taxes will change next year. In jurisdictions with delayed assessments or ones that limit the jumps, sale of the house will trigger a new assessment that will not have a change limit. This next years assessment could match the fair market value.

Each year you need to make sure that your assessed value is not out of the norm for you community and style of house.

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    And in some areas, purchase price on the open market is taken as a de facto assessment (arguably the best one possible), so the taxes immediately get adjusted. You do need to know what the practice is for that particular town. – keshlam Sep 2 '15 at 14:52
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    There're also places that do everything in their power to avoid reassessing. The county where my parents live hasn't done so since 1969; for new construction they have assessors trained to pretend the last 46 years haven't happened. – Dan Is Fiddling By Firelight Sep 2 '15 at 17:01
  • In my county of residence in the US, the assessed value (for tax purposes) is required to be one-third of what the assessor deems to be the fair market value. The assessor's FMV is based on the property as viewed from the outside (they are not allowed to enter the house itself but can walk anywhere on the lot and take measurements if needed, i.e. don't need to look at the house from just the sidewalk or street) and so people with gold faucets, granite counter tops,triple-paned windows, etc that increase the value of the house don't get taxed on the luxurious interior fittings. – Dilip Sarwate Sep 2 '15 at 19:23
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    @GeorgeRenous that depends entirely on the jurisdiction doing the taxing. In Washington state, USA, it's property tax is assessed on the value of the land plus improvements. – Charles E. Grant Sep 2 '15 at 21:52
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    Taxes are based on whatever the locality wants to base them on. Here (IL) it is separated in two pieces, "land" value and "improved" value, ie what additional value is added by the building on it. Ends up meaning that land value (sq ft + location) matter more to your tax than the house, but both count. The assessor then takes [total county budget] and divides it by [total assessed value of the county], except at a smaller level (school district, sort of), and that determines tax [so if total housing value changes a lot for the whole county, your tax won't change]. – Joe Sep 2 '15 at 21:53

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