What’s the difference between the assessed value and the market value of a property?
What is the difference between the assessed value (cadastral value) and the market value of a property? How is each one calculated?
Knowing the value of a property is essential when you’re ready to buy a home. However, there isn’t just one value—there are two (three if you take the final sale price into account). The most relevant are the assessed value and the market value. How do these concepts differ, and what do they imply?
Assessed value and market value: differences
There are several differences between these concepts:
The market value is obtained through an appraisal or in the sales transaction itself, whereas the assessed value is found on the Land Registry (Catastro) e-Office
The market value of a property takes time-related factors into account, such as demand or the economic context. By contrast, the assessed value uses objective information about the property’s real value.
What the assessed value is and what it is for
The Catastro is a database that compiles all data relating to built properties in Spain; among them, the assessed value, an administrative value set objectively for each property and derived from applying the valuation criteria set out in the valuation report (ponencia de valores) of the corresponding municipality.
Having an assessed value that matches the property affects tax payments. This value determines the tax base for the IBI (Property Tax). Therefore, if this value is correct, the taxes charged on the property will be fair and you won’t pay more than necessary each year.
What market value is
The market value of a property fluctuates and depends on several factors, especially demand. If there are many interested buyers looking to purchase a property with specific features, the house’s price in the market will rise. If there aren’t, it will fall.
How assessed value and market value are calculated
If you want to know how a home’s market value is calculated and how it differs from the way assessed value is calculated, the following sections break down each of these points:
Calculate the assessed value of a property. Assessed values can be updated annually by applying coefficients approved by the corresponding General State Budget Laws. To determine the assessed value, the Catastro considers a range of factors and criteria such as:
• The property’s location
• The value of the building
• The value of the land
• The property’s age
• Renovations or refurbishments
• Artistic or historical value
It’s important to note that any changes made in the area surrounding a property could change its assessed value—for example, improvement works on the street where the property is located.
The assessed value takes objective factors such as those above into account, but it does not consider other indicators like supply and demand. In addition, it cannot be higher than a property’s market value, which is why a reference coefficient of 0.5 has been set for the market. The ideal scenario would be for the assessed value to be 50% of the market value.
Calculate a property’s market value
An appraisal is the method that produces the closest estimate of a property’s market value. Many times, if you sell the apartment through a real estate agency, the agency will be the one responsible for setting a price.
You can also calculate a home’s value by carrying out a market study: looking at how much houses with those characteristics sell for in the area, taking into account the condition of the property and the value of the land, among other factors.
Setting a suitable and realistic value will help the sale of a house go more smoothly. A home priced above its market value will rarely sell, and if an interested buyer exists, they may have trouble obtaining a mortgage, since banks often handle the appraisal.
Assessed value higher than market value
Selling a home for more than its assessed value is common and legal. Depending on the method used to calculate the capital gains tax (plusvalía): objective (where the assessed value counts) or real (where the assessed value is not taken into account), selling above it will affect the amount of tax you pay.
Difference between appraisal value and market value
Appraisal value is obtained through a technical analysis. Market value refers to the amount a buyer is willing to pay for a specific property. These are two closely related concepts.
Source: idealista.com



































































































































































































