In real estate, what is the significance of assessed value?

The assessed value of a property is primarily significant because it serves as the basis for determining property taxes owed by the owner. Local governments typically use assessed values to allocate funding for services like schools, public safety, and infrastructure. When the assessed value of a property increases, the property taxes the owner must pay usually also increase, thereby impacting the owner's financial obligations. In contrast, while the assessed value may indirectly influence selling prices or rental decisions, these are not its primary purposes. The assessed value does not necessarily reflect current market trends in real estate, as it is based on a specific evaluation process that may not account for recent sales or shifts in the market.