Assessed Value – Definition

Cite this article as:"Assessed Value – Definition," in The Business Professor, updated February 10, 2020, last accessed October 20, 2020,


Assessed Value Definition

An assesses value refers to the monetary worth or dollar value of an asset or property owned by individuals. This value determines the worth of a property for tax purposes. The assessed value of properties could also mean the value assigned to individual properties by the local government or municipal for tax purposes. Certain factors are put into consideration when determining the assesses value of properties such as a home sale. Generally, the appraised or fair market value of properties is higher than the assessed value of properties.

A Little More on What is Assessed Value

In real estate, the assessed value of a property determines the amount of property tax a property owner will pay to the local government or municipality. The assessed value is not the same as the market value or current value of a property, usually, the assessed value is lower than the fair market value. Assessed value measures ad valorem tax, this value is assigned by district governments to personal properties. The tax assessor of each region or municipality has different ways of calculating the assessed value of personal properties although there are primary standards guiding the calculation.

Property Tax

Homeowners or individuals that own assets in cities, municipalities, or regions are required to pay property tax on the asset owned. The property tax that is payable on a property is determined by the assessed value of the property which is allocated by assessors. Real estate data is a crucial metric when generating the assessed values of properties, this value is often calculated through computerized techniques. There are certain factors that assessors consider when determining the assessed value of a property, these are;

  • The quality of the property
  • Fair market value
  • The condition of the property and other features.

Real Estate Data

Every city, province, municipality or region has real estate data which comprises information about all properties located in the area. It is the duty of the city’s tax assessor to generate assessed values using the real estate data of a province. Different states have different requirements for assessed value, most times, assessors are required to physically assess properties and not just depend on online data when determining assessed value. This value is applicable to pieces of land and every personal property within the city or province.

In some cases, disputes arise between property owners and assessors on the assessed value of properties. In this situation, reassessment can be requested by the property owner.

Fair Market Value

The assessed value of a property is a percentage of the fair market value of the property. This percentage varies and it could be between 10 to 100% of the fair market value. The assessment ratio used in different cities also varies, in Massachusetts for instance, a 100% assessment ratio is used.

Generally, states use the formula below when calculating property tax;

Value x Assessment Ratio x Millage Rate = Effective Property Tax

Reference for ‚ÄúAssessed Value‚ÄĚ…/what-is-the-difference-between-assessed-value-a…

Academic research on ‚ÄúAssessed Value‚ÄĚ

Estimating price indices for residential property: a comparison of repeat sales and assessed value methods, Clapp, J. M., & Giaccotto, C. (1992). Estimating price indices for residential property: a comparison of repeat sales and assessed value methods. Journal of the American Statistical Association, 87(418), 300-306. Accurate estimation of price indices for residential property is an essential feature of real estate research, especially in view of recent efforts to forecast price trends for the 1990s. In this article, price trends are estimated by using the sales price, assessed value and date of sale for every residential property transaction between independent parties. This assessed value (AV) methodology is compared to the repeat sales (RS) method. This article develops a simple method for correcting the effect of the measurement errors associated with assessed value. We demonstrate that the large samples available with the AV method allow the measurement error problem to be reduced to negligible proportions. Using data on the Hartford, Connecticut metropolitan area, we find that price trends estimated from the AV and RS methods are substantially similar over a seven-year period. But the RS method is inefficient because it uses a relatively small subset of the data. Our results indicate that it remains inefficient when the researcher has a dataset much richer in repeat sales than ours.

The causal relationship between trust and the¬†assessed value¬†of management by objectives, Scott, D. (1980). The causal relationship between trust and the assessed value of management by objectives.¬†Journal of Management,¬†6(2), 157-175. The causal direction between interpersonal trust and assessed value of an MBO program is investigated in a large mass-transit organization. Three measures of trust were (ollected that indicated the respondents’ trust of their superiors, top management, and the MBO consultant. The results indicated that trust in superior and trust in top management aff et the assessed value otf MBO. The relationship between trust in the MBO consultant and the assessment value of MBO suggests that an interaction elt occurred.

Estimating price trends for residential property: a comparison of repeat sales and¬†assessed value¬†methods, Clapp, J. M., & Giaccotto, C. (1992). Estimating price trends for residential property: a comparison of repeat sales and assessed value methods.¬†The Journal of Real Estate Finance and Economics,¬†5(4), 357-374. The repeat sales methodology for estimating residential price indices is based on actual appreciation of individual properties. On the other hand, the repeat sales method wastes data, typically discarding a large percentage of all sales. This article explores two issues related to the subsample of repeat sales. First, are paired sales representative of the entire population of properties that sold? Second, is there evidence that sample selectivity biases the price trend estimates? Evidence from five metropolitan areas supports a negative answer to the first question and the second question. It appears that a ‚Äúlemon‚ÄĚ or ‚Äústarter home‚ÄĚ effect causes repeat residential sales to be a biased subsample of all transactions. Cumulative price trends for the repeat subsamples can differ from the full samples over periods ranging from two to ten quarters. While short-term price trends can differ widely, there are no systematic differences among the samples over long periods of time (e.g., three years or more).

Does¬†assessed value¬†influence market value judgments?, Cypher, M., & Hansz, J. A. (2003). Does assessed value influence market value judgments?.¬†Journal of Property Research,¬†20(4), 305-318. Assessed values are widely reported in US property markets and are often used by the public as a proxy for a property’s value. The results of this study indicated that an assessed value treatment did influence market value judgments by nonappraisers. However, despite the nonappraiser findings and the strong anchoring tendencies found in prior studies, expert US appraisers did not depart from normative theory and training and did not exhibit anchoring behaviours on an assessed value reference point. These results seem to indicate that expert appraisers need some content validity before using a reference point as a valuation anchor and make distinctions among unsanctioned anchors that are plausibly informative (such as a pending sale price or expert valuation opinion of another) and unsanctioned anchors that are fundamentally inappropriate. Although the usual caveats of clinical studies apply, this present study extends understanding of reference point usage on valuation judgment.

Appraisal Value and Assessed Value in Italy., Ciuna, M., Salvo, F., & Simonotti, M. (2015). Appraisal Value and Assessed Value in Italy

Dealing with Measurement Error in Real Estate Market Analysis: An Application to the¬†Assessed Value¬†Price Index Method, Clapp, J. M., & Giaccotto, C. (2003). Dealing with Measurement Error in Real Estate Market Analysis: An Application to the Assessed Value Price Index Method. In¬†Essays in Honor of William N. Kinnard, Jr (pp. 55-64). Springer, Boston, MA. Applied researchers are aware that errors in measurement for one of the explanatory variables can reduce or eliminate the accuracy of conclusions from the research. In real estate market analysis, this issue is prominent in two areas: (1) the evaluation of the accuracy of property tax assessments and (2) The assessed value method for house price index construction. This chapter proposes practical methods for dealing with measurement error as applied to these two areas. Econometricians often focus on inferences about parameters of variables measured without error. However, even one variable measured with error introduces bias and inconsistency to the estimates of interest. In this study, we point out that auxiliary regressions can be combined with other readily available information to diagnose the extent of any ‚Äúsmearing‚ÄĚ from variables measured with error. We propose several strategies to obtain bounds on the bias and report an application where even in the presence of badly measured variables the extent of bias is relatively small.


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