Property Tax Assessed Value vs. Fair Market Value

Hard as it might be to imagine, there’s actually one scenario where a home’s property tax value can be too low: when it’s about to go on the market.

While the assessed value isn’t something that Realtors and Appraisers take into account to determine market value ” we/they rely solely on what are called Comp’s, or property taxes”Comparable Sold Properties” ” prospective Buyers sometimes take a peek at it.

And, so do their agents.


The most common (and benign) explanation for a too-low valuation is that the homeowner bought decades ago, and the annual, incremental increases in the tax assessed value simply lagged market appreciation.

Decades later, that gap has grown to $50k ” or $250k.

The not-so-benign explanation for the above: the owner has done a major addition or made other substantive changes that the tax authorities don’t know about.

Market 180°

Ironically, in the aftermath of The 2008 Crash, many would-be home Sellers faced the exact opposite problem: an unrealistically high tax assessed value.

The usual scenario?

An elderly, long-time owner who never updated their property — unbeknownst to the tax assessor, who hiked the assessed value every year in sympathy with their neighbors’.

P.S.: Once a home sells, the sales price presumptively establishes fair market value in most cases.

The exception: short sales and foreclosures, which are assumed not to be arm’s-length transactions.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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