What determines your property's market value
Your property's worth is set by what a buyer would pay for it today, not what you paid for it or what you think it should be worth. That price depends on four things: location, condition, comparable sales nearby, and current market demand. A house in a neighbourhood where similar homes sold for $400,000 last month will not sell for $500,000 this month unless something fundamental has changed.
Location matters more than most people expect. Two identical houses on the same street can have different values if one is near a noisy road or a school. Condition is straightforward — a roof that needs replacing costs money, and buyers factor that in. Comparable sales (called "comps") are the sales prices of similar homes in your area within the last three to six months. Market demand shifts with interest rates, local job growth, and how many homes are for sale at once.
Your property tax assessment is not the same as market value. Tax assessments are set by your local assessor's office and are often lower than what your home would actually sell for. They exist to calculate property tax, not to tell you what your house is worth.
Key Takeaways
- Market value is what a buyer would pay today, based on comparable sales in your area from the last three to six months, not on what you paid or what you owe.
- Online estimates from Zillow, Redfin, or your county assessor are a starting point but often differ from what an appraiser or real estate agent would say.
- A professional appraisal costs $300 to $500 and is the most reliable number if you are selling, refinancing, or contesting your tax assessment.
- Your property tax assessment is deliberately lower than market value and should not be used to estimate what your home would sell for.
- Market value changes with interest rates, local job growth, and how many homes are for sale, so a valuation from six months ago may no longer be accurate.
Online valuation tools and what they actually show
Free online tools like Zillow's Zestimate, Redfin's estimate, and your county assessor's website all give you a number in seconds. These are useful starting points, but they are not appraisals. They are automated guesses based on public data — past sales, tax records, and property features — and they often miss things a human would catch.
Zillow and Redfin both publish their margin of error. Zillow's Zestimate is typically within 5 to 20 percent of actual sale price, depending on how much recent sales data exists in your area. In a neighbourhood with many recent sales, the estimate is usually closer. In a rural area or a neighbourhood where homes rarely sell, the estimate can be far off. Redfin's estimate tends to be more accurate in markets where Redfin agents are active, because they have access to more current information.
Your county assessor's website shows your assessed value and the data they used — lot size, year built, number of bedrooms. This is public record and free to check. Some counties update assessments yearly; others do it every three to five years. An assessment that has not been updated in five years will not reflect recent market changes.
When you need a professional appraisal
A professional appraisal is done by a licensed appraiser who inspects your property in person, measures it, photographs it, and compares it to recent sales of similar homes. The appraisal report includes the appraiser's opinion of value and the reasoning behind it. This costs between $300 and $500 depending on your region and property type.
You need an appraisal if you are refinancing a mortgage — the lender requires it. You should get one if you are selling and want to know what price to list at, or if you are contesting your property tax assessment. You may also want one if you are buying and the sale price seems high compared to recent sales in the area.
Appraisers are regulated by state licensing boards. When you order an appraisal, ask whether the appraiser is licensed in your state and whether they have experience with properties like yours. An appraiser who specializes in single-family homes may not be the best choice for a condo or a commercial property.
How to find comparable sales in your area
Comparable sales — homes similar to yours that sold recently — are the backbone of any valuation. You can find these yourself using public records. Start with your county assessor's website or your county recorder's office, which both publish sales data. Zillow, Redfin, and Realtor.com also show recent sales and let you filter by neighbourhood, price range, and sale date.
Look for homes that sold in the last three to six months, in your neighbourhood or a very similar one nearby, with similar square footage, lot size, and condition. If your home has three bedrooms and two bathrooms, compare it to other three-bedroom, two-bathroom homes, not four-bedroom homes. If your home was built in 1995, do not compare it to a newly built home unless the market is so tight that age does not matter.
Note the sale price, not the listing price. A home listed for $450,000 that sold for $420,000 tells you something important about the market — there is negotiating room. If homes are selling for their listing price or above, the market is tight and prices may be rising.
How market conditions affect what your property is worth
The same house is worth different amounts depending on when it is sold. When interest rates are low, more buyers can afford mortgages, and prices tend to rise. When rates are high, fewer buyers may have access to, and prices often fall. A property worth $350,000 when the mortgage rate is 3 percent might be worth $320,000 when the rate is 7 percent, even though nothing about the house changed.
Local job growth, population changes, and school district ratings also shift value. A neighbourhood near a new tech campus or a major employer may see values rise. A neighbourhood losing population or with declining schools may see values fall. These changes happen over months or years, not overnight.
How many homes are for sale at once matters too. If ten similar homes are for sale in your neighbourhood and only two sell per month, prices may drop because buyers have choices. If homes are scarce and multiple buyers want the same property, prices rise.
Contesting your property tax assessment
If you believe your property tax assessment is too high, you can challenge it. The process varies by state and county, but most places allow you to file a formal objection once a year. You will need to show that your assessed value is higher than the market value of similar homes.
Start by checking your county assessor's website for the deadline and the form you need. Some counties call it an appeal; others call it a grievance or a challenge. The deadline is usually in spring or early summer. You will need to gather comparable sales data — the same information you would use to price a home for sale — and submit it with your objection.
If your assessment is based on outdated information (for example, the assessor thinks your roof is in poor condition when you replaced it last year), bring documentation of the repair. Photos, receipts, and permits all help. If the assessment is simply too high compared to recent sales, bring a list of those sales with prices and dates.
The difference between appraised value, assessed value, and market value
| Type of Value | Who Sets It | What It Is Used For | How Often It Updates |
|---|---|---|---|
| Market Value | Buyers and sellers in the open market | Selling price; refinancing decisions | Changes constantly as market conditions shift |
| Appraised Value | Licensed appraiser hired for a specific transaction | Mortgage lending; dispute resolution | Only when a new appraisal is ordered |
| Assessed Value | County or municipal assessor | Calculating property tax | Every one to five years, depending on the county |
These three numbers are often different, and that is normal. Your assessed value might be $300,000, your home might appraise at $380,000, and it might sell for $375,000. The assessed value is deliberately lower than market value because it is used only to calculate tax. The appraised value and market value are usually close, but an appraisal is a snapshot at one moment, while market value is what a buyer would actually pay today.
Understanding which number applies to your situation matters. If you are selling, focus on market value and comparable sales. If you are refinancing, your lender will order an appraisal and use that number. If you are disputing your property tax bill, you will need to show that your assessed value is out of line with market value in your area.
Frequently Asked Questions
Is my property tax assessment the same as what my home is worth?
No. Assessments are set by your county and are used only to calculate property tax. They are usually lower than market value on purpose. If your home would sell for $400,000, your assessed value might be $300,000 or $350,000. Do not use your assessment to estimate your home's market value.
How often do online estimates like Zillow update?
Zillow and Redfin update their estimates monthly or more often as new sales data comes in. However, the estimates are less accurate in areas with few recent sales. If your neighbourhood has not had a sale in six months, the estimate may be outdated.
Can I use an online estimate instead of paying for an appraisal?
If you are refinancing, your lender will require a professional appraisal — you cannot use an online estimate. If you are selling, an online estimate is a starting point, but a real estate agent's comparative market analysis or a professional appraisal will be more reliable for pricing your home.
What if my home is unique and there are no comparable sales nearby?
Unique properties — a historic home, a property on a large lot, a custom-built house — are harder to value because there may be few or no recent sales to compare to. A professional appraiser can still value it by adjusting comparable sales for differences, but the appraisal will be less certain. You may need to list your home and see what offers come in.
Does the price I paid for my home affect what it is worth now?
No. What you paid is irrelevant to current market value. A home you bought for $250,000 five years ago might be worth $350,000 or $200,000 today depending on market conditions and the neighbourhood. Only current market demand and comparable sales determine value.