Assessed value is what your county uses to calculate property taxes; appraised value is a professional opinion of current market value. They often don't match because assessed values follow different rules -- in California, Proposition 13 caps annual assessment increases at 2%, so your assessed value can be significantly lower than actual market value.
Assessed Value
Assessed value is what your county assessor says your home is worth for property tax purposes.
It's used to calculate your property tax bill:
Property Tax = Assessed Value × Tax Rate
If assessed value is $500,000 and tax rate is 0.75%, you pay $3,750/year in property taxes.
How Assessment Works
Your county assessor:
- Maintains records on all properties
- Updates assessments periodically (yearly or every 3-5 years)
- Uses recent sales data
- Uses property characteristics (size, condition, age)
- Assigns each property an assessed value
California has special rules (Prop 13) that limit assessment increases, so your assessed value might be much lower than appraised value.
Appraised Value
Appraised value is a licensed appraiser's professional opinion of fair market value.
It's used for:
- Mortgage lending (lender wants to know what home is worth)
- Refinancing (equity determination)
- Legal purposes (divorce, estate)
- Insurance (coverage determination)
Appraised value is an independent professional assessment.
Why They Differ
Assessment Lag: Assessors update valuations infrequently (every few years sometimes). Your appraisal is current. If the market has shifted, they won't match.
Different Methodologies: Assessors use mass appraisal techniques (computer models for thousands of properties). Appraisers use detailed comparable sales analysis for specific properties. Different methods = different values.
Assessment Purpose: Assessors are trying to fairly distribute tax burden across all properties. Appraisers are trying to estimate fair market value. Different goals = different values.
California Prop 13: In California, assessed values are capped at 2% annual increases. Your 1995 home might have a $300,000 assessed value despite being worth $750,000. This huge gap is California-specific.
Real Example
Your Home in Southern California:
Assessed Value: $450,000 (based on 2006 purchase price, limited to 2%/year increases)
Appraised Value: $650,000 (based on current market comps)
Why the gap?
- You bought in 2006 for $450,000
- California caps increases at 2%/year
- Home appreciated naturally, but assessment didn't keep up
- Current market is $650,000
- Assessed value = tax value (frozen in time)
- Appraised value = real market value
This is common in California due to Prop 13.
Practical Impact
Higher Assessed Value:
- Your property taxes are higher
- You might be able to appeal the assessment
Lower Assessed Value:
- Your property taxes are lower
- But appraisal for lending purposes uses current market value
- Your home might be worth more than assessment
Which Should You Believe?
For Tax Purposes: Use assessed value (that's what you pay taxes on)
For Lending Purposes: Use appraised value (that's what lenders use)
For Real Estate Decisions: Use appraised value (that's actual market worth)
They serve different purposes.
Assessment Appeals
If you think your assessed value is too high:
- Get an appraisal showing current market value
- File an appeal with your county assessor
- Present the appraisal as evidence
If your appraisal shows value is lower than assessed value, the assessor might lower your assessment.
This can reduce property taxes.
Assessment and Appraisal Relationship
In healthy markets:
- Assessed values and appraised values should be relatively close
- If they diverge too much, the assessment system breaks down
In California:
- Prop 13 creates huge divergence
- This is intentional (protects long-term homeowners)
- It creates inequities (neighbors pay different taxes for similar homes)
What It Means for You
If your appraised value is significantly higher than assessed value:
- You're likely paying less property tax than you "should"
- Your home is worth more than taxes reflect
- This is actually good for you
If your appraised value is lower than assessed value:
- You might be able to appeal and reduce taxes
- Worth investigating if the gap is large
Recent Changes
Some California counties are pushing to update assessments more frequently to address Prop 13 inequities.
But Prop 13 itself hasn't changed. The old rules still apply.
The Bottom Line
Assessed value and appraised value are different things for different purposes.
Don't confuse them.
For lending, refinancing, selling, or real estate decisions: Use appraised value.
For property taxes: Use assessed value (and appeal if you think it's wrong).
They're both legitimate. They're just different.