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What is an Assessed Valuation?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 08 November 2016
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    Conjecture Corporation
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An assessed valuation is the valuation of a piece of real estate for the purpose of determining the amount of property taxes owed on that property. Assessed valuations usually do not reflect fair market value, and should not be considered a valuation for the purpose of settling an estate or arranging a property sale. In addition to being important for the purpose of assessing property taxes, assessed valuations can also play a role in the issuance of municipal bonds.

Most nations require people to pay at least some property tax if they own real estate. The amount of tax can vary, and sometimes laws are passed which allow for the collection of extra property tax to fund a specific project or activity. The assessment is done by a government official, and may be fixed at a set percentage of presumed fair market value, or determined in other ways. Typically, properties are reassessed whenever they change hands, although people can sometimes request an exemption from reassessment, as when property is kept in the family, or request a new assessed valuation in the event that real estate values drop dramatically.

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The assessed valuation of a property is usually printed on tax bills, along with the applicable tax rate, so that property owners understand the math behind their bills. It is also possible to contact the tax assessor to ask about the current assessed valuation of a property. The tax assessor is also the person to talk to if a real estate owner wishes to have a property reevaluated to generate a new assessed valuation for any reason.

When it comes to municipal bonds, some municipalities issue what are known as assessment bonds. Assessment bonds are backed with property taxes. The municipality pledges to repay the bond with monies paid in property tax over a set period of time. Bondholders generally like to see low risk, meaning that the value of the bond would be low when compared to property tax incomes, as this increases the chance that the bond can successfully be repaid.

If the real estate market fluctuates, it can impact assessment valuations and have a chilling effect on municipal bonds. Cities which have low property tax incomes may get a low bond rating, which makes it difficult for them to raise funds when they sell municipal bonds as investors are reluctant to put themselves at risk by putting monies into a bond which may not be paid back.

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