Real Estate Terms Explained: Appraised Value vs. Assessed Value

Have you ever been involved in a real estate transaction, and you hear your lender or your realtor using all these real estate terms, and you're not sure what they mean, or you get them confused sometimes? In this short video, I'm going to explain the difference between the appraised value of a home and the assessed value. I'll also share a tip at the end that could help you reduce the assessed value of your property and help you with your overall tax burden.

If you're buying a home or getting ready to buy a home, you may be getting a loan or mortgage for that property. When you're getting a mortgage or loan, the bank is most likely going to require that you get an appraisal as a condition of that loan. The appraisal is done by a third-party appraiser that the bank will hire, and the purpose of this appraisal is to make sure that the house is worth what you're offering on the property and what the bank is loaning you to buy that property. The bank is doing this appraisal to protect themselves in the event that a borrower defaults on their loan; they want to make sure the property is worth what they're loaning so they can sell that property and get their money back should someone default on their mortgage.

Now, the assessed value of a home is the value that the town or city assigns to your property. Many municipalities value properties at full market value; some will only do it at a percentage of the market value. Typically, though, we still see that amount is slightly lower than what a property will sell for on the active market. This assessed value is what municipalities use to determine your property tax, and this value will change throughout your ownership because towns are required to reassess properties at least once every 10 years. So, your property taxes will change throughout time.

But here's a tip for you on how you can lower that assessed value with your town: once you have lived in your primary residence for at least one year, you can apply for what's called the homestead exemption. This will allow you to deduct up to $25,000 off the assessed value of your home, which will lower your overall property tax burden slightly. Towns are required to reassess properties at least once every 10 years, so your property taxes will change throughout.

I hope these were some helpful tips for you. If you found this to be helpful, please check out my next video where I will share some other terms and what they mean, and I will also be doing a video about home inspections, if they're required, and what happens if you don't get a home inspection. As always, if you have any other questions about real estate or Portland in general, always feel free to reach out.