If you’re buying or selling a home in the DC area, you’ve probably heard the terms appraised value and assessed value. While they sound similar, they serve very different purposes – and understanding the distinction can help you make smarter real estate decisions.
Whether you’re purchasing a condo in Arlington, selling a townhome in Alexandria, or simply reviewing your annual tax bill, here’s what you need to know about appraised value vs. assessed value.
What Is an Appraised Value?
An appraised value is a professional opinion of what a home is worth in the current real estate market. A licensed appraiser determines this value, usually during a home sale when the buyer is financing the purchase with a mortgage.
To calculate the appraised value, the appraiser looks at several factors, including:
- Recent comparable home sales (“comps”)
- The property’s condition and upgrades
- Square footage and layout
- Location and neighborhood trends
- Current market conditions
Why the Appraised Value Matters
The lender uses the appraisal to confirm the home is worth the agreed-upon purchase price.
- If the home appraises at or above the contract price, the transaction can move forward smoothly.
- If the appraisal comes in low, the buyer and seller may need to renegotiate the price, the buyer may need to bring additional cash to closing, or the deal could potentially fall through.
In competitive markets like Northern Virginia and DC, appraisal gaps can sometimes become part of the negotiation process.
What Is an Assessed Value?
An assessed value is the value assigned to a property by the local government for tax purposes.
This value is determined by the county or city assessor’s office and is typically updated annually. The assessed value is used to calculate your property taxes.
The Assessed Value Impacts:
- Your annual property tax bill
- Future tax increases or decreases
- Estimated tax obligations for buyers reviewing a property
Unlike an appraisal, an assessment is not tied to a specific sale or mortgage transaction.
Appraised Value vs. Assessed Value: What’s the Difference?
The biggest difference comes down to purpose.
- Appraised value reflects current market value for a real estate transaction.
- Assessed value is used by the local government to calculate taxes.
Because they are determined differently, the numbers are often not the same.
Which Value Is Usually Higher?
In many cases – especially in strong real estate markets like the DC area – the appraised value is often higher than the assessed value.
That’s because assessed values may lag behind current market conditions. Local governments typically reassess properties on a set schedule, so rapid price increases are not always immediately reflected.
However, there are exceptions.
In a declining or shifting market, assessed values can sometimes appear higher than what a home would currently appraise for. Some jurisdictions also reassess properties more aggressively, which can bring assessed values closer to true market value.
The key takeaway is that appraised values and assessed values do not always move together.
Why This Matters for Buyers
If you’re buying a home, it’s important not to rely on the assessed value to determine what a property is worth.
Instead:
- Focus on comparable sales and market value
- Understand how the appraisal impacts financing
- Be prepared for property taxes to change after purchase
A home’s assessed value may look low online, but that does not necessarily mean the property is underpriced.
Why This Matters for Sellers
For sellers, the appraised value is often far more important during a transaction than the assessed value.
Buyers and lenders care about whether the home supports the contract price in the current market. Even if a seller believes the list price is justified, a low appraisal can create challenges during negotiations.
That’s why pricing strategy should always be based on current market data and recent comparable sales – not solely on the tax assessment.
The Bottom Line
When comparing appraised value vs. assessed value, remember:
- Appraised value = current market value
- Assessed value = value used for property taxes
And while appraised values are often higher in appreciating markets, that is not always the case.
If you’re thinking about buying or selling in Arlington, Alexandria, or the greater DC area, understanding these numbers can help you make more informed real estate decisions.
Ellen Wilson
703-864-3773
[email protected]
NMLS #591525
Licensed Mortgage Professional
Fidelity Direct Mortgage
8133 Leesburg Pike Suite 700
Vienna, VA 22182
