Let’s break down the key differences, when each type of appraisal is used, and why one could impact your wallet more than the other.
What is a home appraisal vs. tax assessment?
A tax appraisal—often known as a property assessment—is conducted by your municipality or province to determine your home’s assessed value for taxation purposes. It’s what your local government uses to calculate your property taxes. These assessments are usually done every few years and are based on mass appraisal systems, not individual inspections.
For example, the Municipal Property Assessment Corporation (MPAC) in Ontario uses computer models to estimate property values based on recent sales, location, and general market trends.
| Tax appraisal is used for… | Tax appraisal is not used for… |
|---|---|
| Calculating annual property taxes | Real-time market value |
| Municipal budget planning | Mortgage or refinancing |
| Legal disputes or tax planning |
A home appraisal—also called a market value appraisal—is conducted by a professional appraiser who assesses your property’s value based on its current condition, upgrades, features, location, and comparable sales. This is the appraisal used by lenders, lawyers, and accountants for financial decision-making.
You might need a home appraisal if you’re:
- Selling your home
- Refinancing your mortgage
- Settling a divorce
- Tax planning for capital gains
- Conducting retrospective valuations for estate or probate
Unlike a tax appraisal, a home appraisal reflects the true market value of the property at a specific point in time—and it often involves a thorough onsite inspection.
Why the difference matters
Here’s where many home owners get caught off guard: They assume their assessed value (from the city) is the same as their market value (from an appraiser). In reality, these numbers can vary by tens or even hundreds of thousands of dollars.
Let’s look at an example:
