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What is the difference between assessed value and appraised value?

Author:
Harold Averkamp, CPA, MBA

Definition of Assessed Value

Assessed value will likely be the amount that a local or state government has designated for individual properties. This assessed value is used in determining the amount of property tax that the property owner will be assessed and will owe.

Example of Assessed Value

Assume that a company’s warehouse is located in a city. The city tax assessor is responsible for determining the assessed value for every parcel of land and every building within the city. The city government then establishes a real estate tax rate to be applied to the assessed values. (There could also be assessed values for personal property.)

The assessed values of real estate or personal property are not necessarily equal to the property’s current market value.

Definition of Appraised Value

Appraised value is the amount (or amounts) contained in an appraisal report for a specific property. The appraisal report is generally prepared by a professional appraiser who looks at the property’s features including size, type of construction, location, condition, and recent sales of comparable property in the vicinity. The appraised value is an attempt to determine the property’s current market value. The appraisal report for real estate will usually report the appraised value of the land separate from the appraised value of the structures. An accountant might use the relationship of these appraised values to allocate the cost of real estate into the cost of the land and the cost of the buildings.

Example of Appraised Value

Appraised values are useful because a company’s balance sheet will report its land and buildings at the cost when they were acquired and will report the accumulated depreciation of the buildings. (Land is not depreciated.) Therefore, if the company wants to refinance its real estate, a current appraisal will usually be required.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

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