What Is Market Value?

The price a property would likely sell for on the open market, typically determined by comparable recent sales.

Detailed Explanation

Market value, sometimes called fair market value (FMV), is the price a willing buyer would pay a willing seller, with both parties having reasonable knowledge of the relevant facts and neither being under pressure to act. This is the standard nearly every state uses as the starting point for property tax assessments. County assessors estimate market value using three approaches: the sales comparison approach (looking at what similar nearby properties sold for), the cost approach (estimating what it would cost to rebuild the structure plus the land value), and the income approach (used primarily for commercial and rental properties). For residential properties, the sales comparison approach is almost always the most relevant. When you appeal, you are essentially arguing that the county's estimate of your home's market value is wrong. The strongest evidence is recent sales of comparable properties that are similar in size, age, condition, and location. If your neighbors' homes are selling for $350,000 but the county says your similar home is worth $420,000, you have a clear case for appeal. The timing of comparable sales matters. Most counties will consider sales from the 6 to 12 months before the assessment date. It is also worth understanding that a county's market value estimate is not always immediately visible on your tax bill in states that use an assessment ratio. What you actually see is the assessed value, market value multiplied by that ratio, and sometimes an additional equalization step. If you want to challenge the underlying market-value estimate itself rather than the math applied to it, you generally have to work backward through your notice of assessment or ask the assessor's office directly for the market-value figure they used.

How It Varies by State

TexasAssessed at 100% FMV

Market value is determined as of January 1 each year. Only sales before this date are considered by the CAD.

CaliforniaProp 13 base year value

Market value only matters at time of purchase or new construction. After that, annual increases are capped at 2% regardless of actual market movement.

Florida"Just Value" = market value

County appraiser must determine just value each year. Homesteaded properties have capped increases but can be reassessed to market value on sale.

Illinois33.33% of FMV statewide; Cook County different

Downstate Illinois assesses at one-third of market value directly. Cook County instead starts at a 10% assessment level for residential property, then applies a state equalization factor to bring the final equalized value roughly back in line with the statewide standard. Cook County reassesses every 3 years; collar counties every 4 years.

Common Misconceptions

Myth:My Zillow Zestimate is my market value

Reality:Zestimates are automated estimates with a median error rate of several percent. They are not appraisals and are not accepted as evidence in tax appeals. Actual comparable sales are the gold standard.

Myth:Market value is what I paid for my home

Reality:Your purchase price reflects market value at the time of sale. If you bought in a hot market, overpaid, or purchased years ago, your purchase price may differ significantly from current market value.

Myth:Declining property values are automatically reflected in my assessment

Reality:Counties often lag behind market changes. If your market has declined, you may need to file an appeal to get the lower value reflected in your assessment.

Myth:The number on my tax bill IS the county's market value estimate

Reality:In assessment-ratio states, the number on your bill is the assessed value, market value after the ratio (and possibly equalization) has already been applied. The underlying market-value figure is usually a step earlier in the process, sometimes on your notice of assessment, sometimes only available by asking the assessor directly.

Impact on Your Tax Bill

In Georgia (40% assessment ratio), if the county estimates your market value at $350,000, your assessed value is $140,000. If comparable sales show your home is actually worth $310,000, the correct assessed value should be $124,000. At an effective tax rate of 1.0%, that $16,000 overassessment costs you $160 per year.

Frequently Asked Questions

What is the difference between market value and assessed value?

Market value is the price a home would likely sell for. Assessed value is what the county actually taxes you on, which in most states is market value multiplied by an assessment ratio (and in some counties, further adjusted by an equalization factor). They are the same number only in 100%-ratio states like Texas.

Can I use a Zillow Zestimate as my market value in an appeal?

No, appeals boards generally give little to no weight to automated valuation estimates like Zestimates. Use verified comparable sales data instead.

If home prices in my area are falling, will my assessment automatically go down?

Not automatically. Assessors often lag behind current market conditions, especially in a declining market. You may need to file an appeal to get a lower market value reflected in your assessment.

How does the county actually estimate market value?

Most commonly through the sales comparison approach, looking at what similar nearby properties recently sold for. Assessors also use the cost approach (rebuild cost plus land value) and, for commercial and rental property, the income approach.

How to Use Comparable Sales in a Property Tax Appeal

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