Definition of "Assessment ratio"

Myrna  Strain real estate agent

Written by

Myrna Strainelite badge icon

Watson Realty Corp

When a real estate owner wants to know what their property tax liability is, they calculate the assessment ratio for their property. An assessment ration is a relationship between a real estate's assessed valuation and its market value. In order to know what is the assessment ratio for any personal property or real estate, a homeowner needs to learn what the assessed value of the property is and its market value. In order to discover a property’s assessment ratio, one needs to divide the assessed value of the property by the asking price of the property. The assessment ratio is rarely at 100%, as the two values rarely match. So let’s see how the assessment ratio works.

How does the assessment ratio work?

As mentioned above, the math to discover the property’s assessment ratio is relatively simple. Getting the two values can be slightly trickier. 

Firstly, you need to know that the assessed value is a value that the authorities, in this case, a government assessor, sets for the property annually to calculate the annual property tax of the owner. In order to calculate the assessed value of a property, the assessor needs the property’s market value, which is multiplied by the assessment rate. The assessment rate is set at the district or county level.

The second element of the equation is the market value of the property. That is relatively straightforward as it is the actual price of the property if it were put on the market. For this, one needs to consider the supply and demand present on the market at that time, the structure of the real estate, materials used, aesthetics, etc. 

The difference between a property’s market value and its assessed value gives homeowners a good understanding of the market’s current condition, discouraged or promising. If the two values are equal or close to being, then the market is promising; if the values are distant, the market is discouraged.

The formula for the assessment ratio is: 

Market Value/Assessed Value = Assessment Ratio%

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Mock closing; all information is available prior to an actual closing in order to insure all documents are properly executed by the appropriate parties. A preclosing is normally used only ...

Also called profit and loss statement. A financial statement depicting a business entity's operating performance and reports the components of net income, including sales of real estate, ...

The abstract of judgment definition is best explained as a written summary of the judgment passed by a court. This abstract of judgment includes the amount of money the losing party of a ...

Rights, interest, and benefits inherent in the ownership of real estate, as distinguished from personal property ...

The federal Reserve Bank's regulation of consumer and mortgage credit transactions. A lender must provide the annual percentage rate (APR) of the loan and other essential data in mortgage ...

Reference to let the vendor beware. Without specific exemptions, the vendor is obligated for action by the buyer for any explicit or implied modifications in the contract or warranty. ...

A presale refers to selling a commercial or residential unit prior to its completion. For example, a residential home developer discounts the price of a home by $10,000 if prospective ...

A decrease in spending dollars because of a decrease in the money supply. Less funds available to prospective home buyers by lenders. Attractive mortgages are difficult to get. ...

The American Real Estate and Urban Economics Association (AREUEA) is a non-profit association founded in 1964, during the Allied Social Science Association located in Chicago. Important to ...

Popular Real Estate Questions