UNDERSTANDING VALUES

Assessed Value vs Market Value

Two numbers, two very different purposes. Understanding the gap between your assessor's figure and your property's real market value is the first step to knowing whether you're overpaying on commercial property taxes.

THE CORE DISTINCTION

Two Different Valuations, Two Different Purposes

Market value and assessed value answer different questions. Market value is what a willing buyer would actually pay a willing seller in an arm's-length transaction — it's shaped by real-time supply and demand, financing conditions, tenant quality, and submarket dynamics. Assessed value is a number on a tax roll, produced by a government assessor using mass appraisal techniques to calculate your annual property tax bill.

Because assessors value thousands of properties at once using broad assumptions, their numbers often drift from real market conditions. A free assessment review compares the two to see if you're paying more than your share. The bigger the gap, the stronger your case for an appeal.

Market value reflects what a real buyer would pay today in an arm's-length deal

Assessed value is a tax-roll figure produced using mass appraisal methods

State-specific assessment ratios (MI 50%, OH 35%, IN 100%) translate between the two

When implied market value exceeds reality, you're over-assessed and overpaying

Not sure which side of the gap you're on? Start with our over-assessment checklist or read our assessment methodology guide to see how assessors reach their numbers — and where cap rate errors most often creep in.

Commercial property owners comparing assessed value to market value documents

WHERE DO YOU STAND?

Assessed > Market vs. Assessed ≤ Market

The relationship between your assessed value and true market value determines whether you have grounds to appeal — and whether you're leaving money on the table.

Assessed Value Exceeds Market Value (Over-Assessed)

You're paying property tax on value that doesn't exist

Every uncorrected year compounds the overpayment

You have clear statutory grounds to file an appeal

A successful appeal creates recurring annual savings

Tenants in NNN leases also carry the inflated burden

Refinancing and sale prices get distorted by the bad value

Assessed Value At or Below Market Value (No Action Needed)

Your assessment reflects (or understates) real value

Filing an appeal would not reduce your liability

Annual review is still worthwhile as markets shift

Watch for reassessments triggered by sale or permits

Monitor local cap rate trends and vacancy changes

Revisit if tenants leave or conditions deteriorate

WARNING SIGNS

When Your Assessment Likely Diverges From Market Value

Certain situations almost always produce a gap between what the assessor says your property is worth and what it would actually sell for. If any of these apply to you, a closer look is warranted.

You recently bought the property below the assessed value

A major tenant vacated or your occupancy has dropped significantly

Comparable sales in your submarket are trending down

Your property has deferred maintenance or functional obsolescence

Cap rates have expanded since the last reassessment

The assessor is using pro forma rents you could never actually charge

Your NNN recoveries or CAM charges have had to be renegotiated downward

The building has been partially or fully converted to a lower-value use

FINDING THE REAL NUMBER

How to Determine Your Property's Real Market Value

Before you can argue the assessor is wrong, you need a defensible view of what your property is actually worth. Three steps get you there.

Gather Recent Comparable Sales

Pull arm's-length sales of similar commercial properties in your submarket from the last 12 to 24 months. Match on property type, size, tenant mix, and condition. Avoid distressed sales and related-party transfers unless they're the only data available.

Run an Income Approach Check

Take your property's actual trailing-twelve-month NOI and divide it by a market-supported cap rate for your asset class and submarket. The result is a defensible income-approach value — often dramatically different from the assessor's number.

Reconcile and Compare

Weight the sales and income approaches based on data quality, then compare the reconciled value against the value implied by your assessment and state ratio. If there's a meaningful gap, you have an appeal.

Market value is the price your property would fetch in an open transaction between a willing buyer and a willing seller, neither under any pressure to act. Assessed value is the number your local assessor places on the tax roll to calculate your property tax bill. The two figures are related but rarely identical — each state applies its own assessment ratio and methodology. When the assessed value climbs above what the market actually supports, you're likely over-assessed and paying too much tax.

Michigan law requires that assessed value (also called State Equalized Value, or SEV) equal 50% of a property's true cash value — its market value. If your commercial property would sell for $2 million, your SEV should be $1 million. If the assessor pegs your SEV at $1.3 million, that implies a market value of $2.6 million, and you have grounds for an appeal. Michigan also distinguishes SEV from taxable value, which uncaps after a sale and often triggers a much bigger jump than owners expect. Read our commercial property assessment guide to understand how Michigan assessors arrive at true cash value.

Ohio taxes commercial real estate on 35% of market value. The county auditor establishes your property's full market value, then applies the 35% ratio to produce the taxable value. Ohio reappraises every six years with a triennial update in between, so assessed values can lag real market conditions — which is exactly when over-assessments occur. If your 35% taxable value implies a market value higher than what comparable sales or your actual cap rate and NOI would produce, you can file a complaint with the Board of Revision.

Indiana assesses commercial property at 100% of market value-in-use, with no fractional ratio. Instead, the Department of Local Government Finance applies annual trending factors to reflect local market movement between general reassessments. That means your assessed value should, in theory, track current market value each year. In practice, broad trending factors miss property-specific issues like vacancy, deferred maintenance, or poor lease rollover. When that happens, a free assessment review can identify where the assessor's numbers diverge from reality.

Several factors can push market value below assessed value: rising vacancy, declining rents, deferred maintenance, tenant concessions, a softening local submarket, or changes in property use. Assessors typically rely on mass appraisal techniques and broad market trends rather than property-specific data, so they often miss these factors — the same dynamic that fuels the dark store theory debate over big-box retail valuations, and it's a major reason property taxes keep increasing even when a property is struggling. That's why properties acquired out of distress, or properties hurt by tenant departures, frequently end up over-assessed. The gap is real money you can recover through an appeal.

The strongest evidence is a combination of recent comparable sales, your property's actual income and expense history, and a market-supported cap rate. A recent arms-length purchase price is persuasive evidence — especially if you bought within the last 12 to 24 months. Appraisals from licensed commercial appraisers carry significant weight at tribunals and boards of revision. Our appeal evidence checklist spells out exactly what to gather, and the appeal process guide walks through how that evidence gets presented. We cover the full process in our assessment guide and can build the evidence package for you as part of a free review.

SELECT YOUR STATE

Find Your State's Appeal Process

Property tax appeal procedures vary by state. Choose your state below for a detailed guide to the appeal body that handles your commercial property tax appeal.

Michigan

Tax Tribunal

Michigan's statewide tax appeal body. Strict May 31 / July 31 filing deadlines depending on property type.

Michigan Tax Tribunal

Ohio

Board of Revision

Ohio's county-level first step for property tax appeals. March 31 filing deadline every year.

Ohio Board of Revision

Indiana

PTABOA

Indiana's county Property Tax Assessment Board of Appeals. Form 130 filed within 45 days of notice.

Indiana PTABOA

Find Out If You're Over-Assessed

Send us your latest assessment and we'll tell you — for free — whether the number lines up with real market value.