Assessed value changes with the sale of a home; see how this can affect your budget.

When you’re looking to buy a home, there are a lot of numbers to contend with, including market value and assessed value. Discover the difference between these two figures and how they affect homebuyers.

How is assessed value determined and used?

A home’s assessed value is the basis upon which property taxes are calculated. In Michigan, the assessed value is typically equal to 50% of the home’s market value. For example, a home that sold for $250,000 is assessed on the basis of $125,000.

Assessed value typically increases over time. Michigan state law limits increases in property taxes to 5% each year. However, the increase is often under this maximum, for example during years when inflation is low.

Also, if you make improvements that increase the value of your home, the local tax assessor may increase the assessed value.

If you believe the assessed value of your home is too high, you can appeal to your local tax assessor to lower the rate.

How is market value determined?

Market value is the price an actual buyer is willing to pay. Often, a home’s listing price is near market value, but not always. Many things can affect a home’s market value, including location, school district, local supply and demand, sales prices of similar homes and the home’s age and condition.

What the difference between assessed and market value means to homebuyers

When you view property listings, you may see a large gap between the assessed value and the seller’s perceived market value. In fact, the assessed value may be far less than 50% of the listing price, which is because the assessed value is adjusted whenever a home a is sold. If the current homeowners have been there for several decades, the assessed value and corresponding current property taxes will certainly be higher for a new owner.

Estimate future taxes on a home

When considering the purchase of home, estimate the property taxes based on 50% of what you expect to pay for the home, rather than the current owner’s tax bill. Check out the Michigan Department of Treasury’s list of current millage rates for cities and townships throughout the state.

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If you’re ready to buy a new home, our mortgage team can help you with flexible lending options. Discover more about Consumers home loans.

Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.