What is the difference between “assessed” value and “appraised” value?

Why is there often a huge difference between what the Assessor says your property is worth and what an appraiser says maybe during a purchase or refinance? Let’s take a look below a some of the main distinctions and then consider a real life example of a property owner who has overpaid about $8,000 in property taxes in recent years because his assessment was simply too high. Ouch.

Assessor vs Appraiser - by Sacramento Appraisal Blog

Assessor vs. Appraiser: An Assessor in California is required to have a certified appraiser’s license, but that doesn’t mean the value will be same as an appraiser coming out to your house during a refinance, purchase or other situation. Ultimately there is a huge value difference at times because the Assessor is establishing value for taxation purposes (and is bound by the protocols of tax code) and an independent fee appraiser is likely measuring the current market and is not doing anything related to taxation.

Assessed value vs Market Value of a 4-plex - by Sacramento Appraisal Blog

Overpaid $8,000 in Property Taxes: This case above is a striking example of one of the unfortunate byproducts of a mass appraisal process by the Assessor. This property owner’s assessment on his fourplex in Sacramento was accurate for a couple of years after purchasing around $300,000 in 2003, but as values tanked in the neighborhood, the assessed value simply remained too high above all other competitive sales. The sad result for the property owner has been about $8,000 in overpayment through the years. Unfortunately the owner cannot go back to dispute the previous years of assessment, but at least this year he is going to appeal his property taxes to hopefully bring the assessed value down from $325,000 to around $200,000 where it should be.

Any thoughts, questions or stories to share?

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  1. says

    I always tell people to review their assessment each year to see any abnormalities in assessed value as well as square footage on the house. If the county shows your home as having more living area that it actually has this can also result in over assessment. Great post Ryan.

  2. Julie GA in FLA says

    Hi Ryan:
    Here in Fla we have limits on how much a property can be adjusted in one year if you win the tax appeal. This obviously dissuades some owners from spending $$ on an appraisal.

    It appears there are no such limits in CA?

    Thanks. Love your web site. I marvel at how you find the time!

    • says

      Interesting Julie. I’ve never heard of such a limit in California. The law you mention in Florida seems to strongly favor the Assessor, which is too bad if they are blatantly wrong. Why should constituents have to essentially pay for the Assessor’s errors? Maybe there is a clause in the law somewhere to help out somehow in cases where a property is incredibly off.

      One client I consulted with had his property lowered by more than one million dollars in assessed value, which was a reduction around 75% of the total value in just one year. If it’s assessed too high, it should be reduced. That’s how it plays out in California (thankfully).

      Thanks Julie. I appreciate your comment and your kind words.

  3. Julie GA in FLA says

    Thx for reply. I just reviewed laws again and here is some clarification. The limits are guidelines that range from 15% on property assessed under $50K to 5% of assessments over $1 mil.

    If the suggested reduction by the VAB does not exceed these guidelines, the County Prop Appraiser MUST except them. If VAB reduction exceeds those limits, PA has authority to appeal VAB decision to Circuit Court (which they did on a high $$ property last year and won). So, still some disincentive to owners with large incorrect assessments.

  4. Adam says

    I’m in Sac and just contested my appraised value for a second year in a row! This year the assessor changed from a fax-in based system where you list comparable sales to a online form that just has an open text box where you type why your think the appraisal is too high. It’s certainly easier for consumers but seems like the lack of structure would be a problem for the assessor’s office…

    • says

      Thanks Adam. We’ll see how it pans out. This is of course for the informal review (not an official appeal that still does require $30. I just wanted to mention that for the sake of clarity for any readers).

      Did you have success last year? Did they get you too high again this year even after a decline? I once appealed my property taxes three years in a row, but I have not had to do anything for the past three or so years after the value was finally in sync with the market.

  5. Ralph Valencia says

    A thing to note Ryan, is indirectly mentioned by people who have posted comments in Sac…
    1. You have to contest the value every year… getting your value lowered 1 year does not mean they will start using that value as their base point the next; at least in CA.
    2. It definitely differs by state. Assessments in TX are typically done every 2-3 to obtain current market info, sometimes sooner… and with a higher property tax base here.. (2.2-28%)… i think people are much more concerned about property values… because they have a serious affect on your monthly mortgage payment. A $10k increase could bump your mortgage payment up an extra $20-30/month to cover escrow payments. In the ~6 months since i left CA… i seen values go from $220s where i was previously looking, to around the $260s… that’d be an extra $80-90/month in taxes added to the mortgage here… so value increase…while they happen… are much smaller.

    As a recommendation… have people look at the market from December to February..save any info they can until appeals time.

    Just a thought.

    • says

      Thanks Ralph. You are definitely correct about having to contest the value each year. In assessment language we’d say the temporary decline in value give to an owner under Proposition 8 is only temporary. It can change drastically the following year if the market changes drastically. Ultimately the assessed value can creep all the way back up to the Prop 13 level (base year value plus 2% for inflation each year). It’s been interesting to see how appeals have lessened over the past few years as the market changed. I posted a graph in this article for reference: http://sacramentoappraisalblog.com/2014/04/17/understanding-how-it-works-to-appeal-property-taxes/

      That’s interesting to hear about your market. It’s a good thing the taxes don’t skyrocket.

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