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Last month, my neighbor called me because she was confused. Her home appraisal said it was worth $385,000, but her property tax assessment said it was worth $310,000. She couldn't understand why two professional evaluations were off by $75,000. Let me back up a bit. These numbers don't compete with each other. They're answering questions that are very different.
People will use both words interchangeably when talking about owning a home. They both measure the value of a home, but they do so for very different reasons.
This is how to think of it: An appraisal tells you how much someone would pay for this house right now. An assessment answers the question, "How much should this property add to the local tax base?"
This is what it means for you. When our team works with first-time buyers, a lot of them don't know that they're going through both evaluations at different times. The appraisal takes place during the purchase, usually a few weeks after the offer is accepted. The test could have been done months or even years ago.
A licensed appraiser in your state finds out what your property's current fair market value is. This expert comes to your home in person to check its condition, improvements, and desirability to make sure that lenders aren't lending more than the property is worth.
In 2025, the average cost of a home appraisal was between $314 and $423, with most homeowners paying around $358 for a standard single-family home. Prices depend on where you are. In Kentucky, appraisals cost about $300 on average, but homeowners in Washington or New Jersey might pay almost $600. According to World Population Review, homeowners in California usually pay between $350 and $450, while appraisals in Texas cost between $325 and $425.
Loans backed by the government are more expensive. The average cost of an FHA appraisal is between $400 and $700, while the average cost of a VA appraisal is between $425 and $900.
A local government assessor figures out how much money the property tax brings in and gives you your property assessment. Assessors work for your county or township, unlike appraisers who work on their own. They set the assessed value, which is the amount of property tax you pay each year.
The assessment ratios used by different states are very different. Some states tax at 10% of the market value, while others tax at 100%. Let me make this easier for you by using real numbers.
Property Tax Calculation (Using a Handful of States)
At a home value of $400,000:
Source: PropertyShark
The effective property tax rate matters more than assessment ratio. New Jersey maintains the highest rate at 2.23%, while Hawaii has the lowest at 0.27%. Same home, dramatically different tax bills.
How appraisers figure out how much your home is worth on the market
The appraiser gives an unbiased estimate of how much your home would sell for right now. It takes 30 minutes to two hours to inspect the body, and the report is sent out within one to two weeks.
The appraiser looks at the total square footage, number of bedrooms and bathrooms, style of architecture, type and condition of the foundation, roof, HVAC systems, plumbing and electrical, built-in appliances, kitchen and bathroom renovations, additions, finished basement or attic spaces, flooring upgrades, general wear and tear, cosmetic condition, lot size and landscaping, and garage or outbuildings during the visit.
Examining Sales That Are Similar
After taking pictures of your property, the appraiser looks at recent sales of homes that are similar to yours. They're looking for homes that sold in the last 90 days, preferably within a mile, that have the same key features as yours.
The appraiser makes dollar changes for each comparable. More square footage makes it worth more. Updates or better condition add value. More bedrooms or bathrooms are worth more. A bad location or busy streets lower the value.
These changes make an adjusted sales price for each comparable, and the appraiser uses these to figure out how much your property is worth.
The appraiser also takes into account how the market is changing right now. When there aren't many homes for sale and there are a lot of buyers, appraisals go up. Markets that are slower and have a lot of inventory show lower values. Properties that are close to great schools, safe neighborhoods, easy shopping, and desirable amenities are worth more.
Assessors work for the government and do things in a very different way.
Different local governments use different ways to assess things. Some counties do this every year, others every few years, and some only when properties sell.
Assessors usually use three different ways:
The average property tax bill in the U.S. went up 2.8% from 2023 to 2024, reaching $3,500.
To figure out how much you owe in property taxes, multiply the assessed value by the millage rate in your area. A mill is equal to $1 in taxes for every $1,000 of assessed value.
The yearly property tax is $320,000 divided by 1,000 and then multiplied by 30.
That's $800 a month if you pay through mortgage escrow.
Buying: If you want to get a mortgage, your lender will need an appraisal before they will approve the loan. This happens two to three weeks after the offer is accepted. The buyer pays for these costs at closing.
When you refinance to get better rates or to use equity, lenders need a new appraisal. The National Association of REALTORS® says that delays in appraisals got a lot better in 2025. Only 14% of people said there were delays, down from 35% in 2022.
Cash-Out Refinancing: To turn equity into cash, you need to make sure the value is right.
Home Equity Loans or HELOCs: To use equity, you need to prove its worth, but some lenders will accept automated valuations for smaller amounts.
Divorce or Estate Settlements: To divide property, you need to get formal appraisals that show the fair market value.
Annual Reassessments: Some places check all of their properties once a year. More common in markets that are going up quickly, like Austin and Boise.
Reassessments every few years: Many places do this every three to five years. Unless improvements are made, the assessed value of a property stays the same between cycles.
Reassessments that are triggered: Major renovations cause reassessment. If you got building permits for a lot of work, your assessed value will probably go up.
In some places, like California, properties are automatically reassessed when they sell.
You will get a notice about your property tax assessment every year, usually a few months before the payment is due.
My neighbor thought someone had made a mistake when she saw the $75,000 gap. Both numbers can be correct for what they are used for.
Appraisals show how the market is doing right now. Your appraisal is based on the fact that similar homes sold for high prices last month.
Assessments are based on past valuations. If your jurisdiction last reassessed three years ago, your assessed value is based on how things were three years ago.
States purposefully set assessed values as a percentage of market value. PropertyShark says that Alabama's average effective tax rate is 0.38%, while Illinois's is 2.07% (as of October 2025).
For a house worth $1 million:
These differences are the result of decisions made by the state about taxes.
If your appraisal is less than the price you paid:
More and more people are appealing their property taxes, and they often win. The National Association of Counties says that property owners who appeal win at least some reductions in 30% to 50% of cases.
How to Appeal:
Need help from an expert? Our loan officers get paid a salary, not a commission, so their advice is always fair.
You only have to pay for your home appraisal once when you buy it and again if you refinance. It's not a lot compared to the total closing costs, which are 2% to 5% of the purchase price, because most single-family homes cost between $314 and $423.
You have to pay your property taxes every month. If you live in a state with a 1.5% effective tax rate and own a $400,000 home, you pay $6,000 a year, or $500 a month. That's $180,000 over the course of a 30-year mortgage.
Appraisals have a direct impact on whether you can get a mortgage. Your loan will go through smoothly if the appraisal comes in at or above the purchase price. If it comes in low, you have to renegotiate the price, bring more money, challenge the appraisal, or walk away.
The National Association of REALTORS® says that problems with appraisals caused about 8% of contracts to fail in the last few years.
Your debt-to-income ratio is affected by your property taxes. When figuring out how much house you can afford, lenders take into account your monthly property tax payment.
Hold on, I need to make something clear. When looking at homes in different areas, property taxes should be a big factor. That $3,000 difference in taxes between two similar properties adds up to $250 a month, or about $60,000 over 20 years. We learned about systems thinking in my MSW program, and this is a great example.
Smart buyers figure out the total cost, which includes the principal and interest, property taxes, homeowners insurance, HOA fees, and maintenance reserves (usually 1% to 2% of the home's value each year).
The book answer is to multiply your monthly payment by 360 to get the total costs, but you should really add in property tax increases. Based on past data, property taxes usually go up by 2% to 4% each year.
Ask for information about property taxes early. Our home affordability calculator automatically includes property taxes. Before getting preapproved, think about how property taxes are different in different neighborhoods.
Check out the history of the home's assessments before you buy it. If the assessed value has gone up a lot, it will probably keep going up.
Set up your appraisal as soon as you sign the contract. Take a close look at the report. Don't think that the appraiser saw everything.
Don't worry if the appraisal is low. About 92% of appraisals agree with the agreed-upon purchase price.
Keep an eye on your annual assessment notices. A lot of homeowners throw these away, only to be shocked by higher tax bills.
Think about how property taxes will change before making big changes. My kids kept asking me to finish the basement so they could have a playroom, but I didn't do it until after our reassessment cycle. That gave us three more years before the change showed up in our assessed value.
The main difference is what they are for. Appraisals help lenders and are done during transactions to find out the current market value. Assessments are done on a regular basis to figure out how much property tax to charge local governments.
Both are estimates, but they were made using different methods and time frames. The appraiser walks through your house and sees the bathroom you just remodeled. The assessor might only have three-year-old data and a quick visit to work with.
The appraisal will tell you if your purchase goes through. The assessment will tell you how much your housing costs will be each month for years to come.
Before making an offer, make sure you understand both evaluations if you're buying. If you own a home, check your assessment every year and file an appeal if it's wrong.
Take a deep breath. The goal of these evaluations is to make the systems for buying and selling real estate and collecting taxes fair.
Not always. The $100,000 difference could be perfectly normal. Many states purposely assess at rates lower than market value, sometimes as low as 10% to 50%, and then charge higher millage rates. First, find out what your state's normal assessment ratio is. If homes in your area are worth 75% of what they're worth on the market, then $300,000 assessed on a $400,000 market value is just right. That being said, if your area doesn't reassess often and your appraisal shows a big increase, you might see an increase at the next cycle. Knowing when your local reassessment will happen is the best way to protect yourself. Keep detailed records of the state of your property and any maintenance problems that could justify a lower assessment.
You can try, but it doesn't work very often because they do different things. Sellers and appraisers will say that assessments often use old data. But if the property tax assessment is a lot higher than the price you paid for it, you should look into it. Getting recent sales that are similar to yours is a better plan. It's strong evidence if homes that are very similar to yours sold for less in the last three months. Tax assessments on property are public records and can help explain things, but they aren't strong enough to be used as primary evidence.
The frequency of reassessments can vary greatly. Some places check the value of all properties every year, while others do it every three to five years or only when properties are sold. You can't stop scheduled reassessments. These happen all over the jurisdiction. You can control reassessments that happen because of improvements. If you're going to do a big renovation, make sure you know the rules in your area. Some homeowners plan their improvements to happen right after a reassessment cycle so that they have the most time before the improvements affect their tax bill. But don't skip getting the necessary permits to avoid being reassessed.
In general, property tax increases don't happen when you refinance your home. Your property tax assessment has its own schedule that is separate from mortgage transactions. Usually, appraisals are private papers between you and your lender. But if you're doing a cash-out refinance and using the money to make big changes to your home, those changes might make the property value go up when you get building permits. Also, if your area does regular blanket reassessments and market values have gone up a lot, your property taxes might go up at the same time as your refinance, but one didn't cause the other.
If your appraisal is higher than what you paid for the property, that's good news because it gives you equity right away. You might not believe it, but this happens more often than you think, especially when sellers want to sell for reasons other than money, like moving for a new job, selling an estate, or settling a divorce. It could also happen if you found a listing that was too cheap. You shouldn't be suspicious unless the appraisal seems way too high. This means that your lender is protected, you're building equity from the start, and you might be able to refinance quickly because your loan-to-value ratio is good.
You can hire your own appraiser, but you'll have to pay the whole fee yourself, which is usually between $350 and $550. It depends on your lender's rules whether this helps. Some lenders will look at a second appraisal and use the average of the two values. Some people use the lower of the two appraisals. Before you spend money, talk to your lender about their rules. In a lot of cases, it's better to formally challenge the original appraisal by providing more comparable sales or pointing out mistakes.
Yes, and this happens more often than most homeowners think, especially in markets that are going down. If property values in your area have gone down but your government hasn't done any recent reassessments, the value that is assessed might be higher than what buyers would pay. When assessors use old comparable sales from before the market went down, this can also happen. If you think this might be the case, get proof, such as recent sales of similar properties or independent appraisals. Follow all deadlines and file an appeal with your local board. If you're overassessed, it means you're paying more property tax than homes that are similar to yours.
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