Which statement best differentiates Market Price from Assessed Value?

• A. Market Price is the price consumers would pay in an arms-length sale, while Assessed Value is used for tax purposes
• B. Market Price is used to set taxes, while Assessed Value is based on replacement cost
• C. Market Price and Assessed Value are always equal
• D. Assessed Value is the price in a recent sale

Answer: (A)

The main idea here is the difference between what a property would realistically sell for in the market and what a tax assessor assigns for tax purposes. Market price is the amount a willing buyer would pay a willing seller in an arms-length sale under current market conditions; it reflects actual buyer and seller negotiations, financing terms, and market dynamics. Assessed value is the value the tax authority uses to calculate property taxes, determined for taxation on a defined date and based on valuation methods the assessor uses, which is not the negotiated sale price. It’s the figure used to determine how much tax the property owner owes, not the price you’d expect to pay in a sale. Because of that, market price and assessed value rarely match exactly, and the assessed value isn’t simply the price from a recent sale or replacement-cost based in all cases. That explanation aligns with the option stating that Market Price is the price consumers would pay in an arms-length sale, while Assessed Value is used for tax purposes.