Homes don’t come with sticker prices set in stone. Rather they are moving targets—that’s what makes buying and selling real estate so fun! (Or frustrating, depending on your perspective.) And, as a buyer or seller, you will likely hear two “prices” thrown about: assessed value versus market value. So what’s the difference? While assessed value and market value may seem similar, these numbers can be different—typically assessed value is lower—and they’re used in distinct ways as well. So let’s clear up any confusion so you can wield these terms to your advantage.
    What is market value? Casey Fleming, a former real estate appraiser and author of “The Loan Guide: How to Get the Best Possible Mortgage,” says the technical definition of market value is “the most probable price that a given property will bring in an open market transaction.” Or, in plain English, “It’s the price that a buyer is willing to pay for a home, and that a seller is willing to accept.”
    What is assessed value? When trying to understand the assessed valued of a property, you must know who is doing the assessing and why the property is being assessed. Municipalities, mostly counties, employ an assessor to place a value on a home in order to levy property taxes on it. To arrive at a value, the assessor looks at what similar properties are selling for, the value of any recent improvements, any income you may be making from, say, renting out a room in the property, and other factors—like the replacement cost of the property if, God forbid, it burns down in a fire. In the end, the assessor comes up with a value of your home. Then, he multiplies that number by an “assessment rate,” a uniform percentage that each tax jurisdiction sets that is typically 80% to 90%. So if, say, the market value of your home is $200,000 and your local assessment rate is 80%, then the assessed value of your home is $160,000.
    What assessed and market values mean to you: While a home’s market value can rise and fall precipitously based on local conditions, assessed values are typically more immune to fluctuations. Some states, like Oregon, prohibit the assessed value from rising more than 3% a year, “even if the market value goes up more,” says Nathan Miller, founder of Rentec Direct, a software company that educates property manager and landlords.
    But the bottom line is, don’t get bent out of shape if you hear your assessed value isn’t as high as you’d hoped. Assessed value is used mostly for property tax purposes. Home buyers and sellers, on the other hand, look more to market value instead.  A home’s market value often is a good starting point for all kinds of things. For one, listing agents use market value to help sellers come up with a fair asking price for their home. And, since buyers shouldn’t just trust what sellers say their place is worth, their own agent can also estimate the home’s market value and come up with a different price that they think their clients should offer.  By Lisa Gordon, realtor.com