Q&A: Is a Property’s Appraised Value the Same as its Assessed Value?

Last Updated on December 21, 2021 by Lamudi

Real property sales are usually private in nature. The government, however, is always indirectly involved in all of them. It needs to determine how much tax should be levied for each particular transaction. Financial institutions in turn, also have a part to play but in a more limited capacity.

Q&A: Is a Property’s Appraised Value the Same as its Assessed Value?

There are different values to consider when purchasing real property. It is not only the owner’s asking price that will be a part of the transaction. This is especially true should the prospective buyer seek to enter into a loan agreement to pay for the remaining balance of the agreed purchase price. Generally, there will come a point during the negotiations that the Fair Market Value (FMV), appraised value and assessed value will be discussed. Knowing what these figures are and how their roles will influence the sale could potentially help you prepare for them.

Q: What is Fair Market Value?

A: A discussion on Appraised Value and Assessed Value would seem more complete with the inclusion of FMV. These three amounts are often discussed together. There is a notion that the property’s asking price should conform to what its current FMV is. This is not, however, the case. Sellers can hold out for sale property they own at whatever price they desire. Whether it will be bought at such amount or not is another story altogether.

FMV, on the other hand, is the price at which both parties finally agree to. It is the lowest that the seller is willing to sell and the highest that the buyer will buy. Nothing should unduly influence them to arrive at their decisions. There is nothing speculative about FMV because it is based on the actual price that the property is purchased. It is the result of the market’s behavior.

An official standard to determine FMV has yet to be established. It is likely however to include the latest real estate appraisals and current closed sales of similar property in the given area.

Q: What Is a Property Valuation?

A: Valuations and appraisals are some of the most crucial procedures in purchasing or selling real estate property. When it comes to purchasing and selling real estate, accurate real estate assessments assist investors and property owners in making smarter, more strategic decisions. Since a real estate investment is often not a short-term transaction, there are numerous factors to consider and strategies to use to ensure a profit and maximize returns over the long term.

Q: What is Appraised Value?

A: Connected to FMV is appraised value. Determining it is private in nature and is commonly initiated by a bank or other lending institutions. The process is usually prompted by a prospective buyer. It is appraised in order to see if it is feasible for the bank to release the loan amount. This is applied for by the buyer and is necessary for its purchase. These valuations are usually made through an appraisal officer who was commissioned by such financial establishments.

Note that the appraiser is not a party to the transaction. This will be undertaken by a disinterested third party whose determination constitutes an opinion. It is not subject to an appeal though getting a second opinion from another appraiser is acceptable.

The appraised value can be defined as an evaluation of a property’s value at a specific point in time. The value is determined by a licensed appraiser during the mortgage origination process. The appraiser is typically chosen by the lender but the appraisal is paid for by the borrower.

Q: What Is the Recent Property Valuation in the Philippines?

A: In the Philippines, a property’s value is calculated per square meter. The average price per square meter for residential construction as of the second quarter of 2021 is Php10,409. In general, a property’s value increases with how close it is to an urban center.

In addition to size, useful space within the property is taken into account when estimating real estate values. Expandable kitchens, baths, and bedrooms are in high demand. Finished attics and fully developed basements also increase the value of the property.

Q: How is Appraised Value Computed?

A: Depending on the type of property subject to valuation, appraisers can calculate it by selecting one of three methods. These are:

  • Income Capitalization, applicable for commercial properties generating income
  • Capitalization Rate = Annual Net Operating Income / Cost or Value
  • NOI = Gross Potential Income – (Vacancy + Collection Costs) – Operating Expenses


There is a small office building valued at Php 30 million with a yearly income of Php 1.5 million. It could potentially earn Php 3 million at full occupancy though it is presently half occupied. There are some funds owing to the owner though needs to spend Php 50,000 to collect them. The cost for administration expenses, insurance and real property taxes amount to Php 300,000.

This will be computed as follows:

NOI = 3,000,000 – (1,500,000 + 50,000) – 300,000

NOI = 3,000,000 – 1,850,000

NOI = 1,150,000

Capitalization Rate = 1,150,000 / 30,000,000

Capitalization Rate = 0.03833

  • Cost Summation Approach, the summation of the land value (using the area’s prevailing FMV) and the improvement’s depreciated value


The FMV of land in the area is Php 100,000 per sq.m.

The average price per sq.m. of houses are at Php 50,000

The 5-year-old house is 200 sq.m. built on a 300 sq.m. lot area

Appraised Value = Value of land + (Value of improvement – Depreciation)

Appraised Value = (Php 100,000 x 300 sq.m.) + (50,000 x 200 sq.m.) – (((Php 50,000 x 200 sq.m.) / 50 years)) x 5 years)

Appraised Value = Php 30,000,000 + 10,000,000 – ((10,000,000 / 50) x 5 years)

Appraised Value = Php 30,000,000 + 10,000,000 – ((10,000,000 / 50) x 5 years)

Appraised Value = Php 30,000,000 + 10,000,000 – ( 200,000 x 5 years)

Appraised Value = Php 30,000,000 + 10,000,000 – 1,000,000

Appraised Value = Php 30,000,000 + 9,000,000

Appraised Value = Php 39,000,000

Sales Comparison, uses comparable FMV of properties within the same vicinity and utilizes prices of recently closed transactions


Selling Proper D, 350 sq.m. in the same area as the recently sold properties below

Property A, 300 sq.m. sold for 3,000,000 (August 2018)

Property B, 250 sq.m. sold for 2,800,000 (September 2018)

Property C, 350 sq.m. sold for 3,200,000 (July 2018)

Appraised Value = (3,000,000 + 2,800,000 + 3,200,000) / (300 + 250 + 350)

Appraised Value = (9,000,000) / (900 sq.m.)

Appraised Value = (9,000,000) / (900 sq.m.)

Appraised Value = Php 10,000 per sq.m.

Appraised Value = Property D, (350 sq.m. x 10,000 per sq.m.)

Appraised Value = Property D, Php 3,500,000

Q: What is Assessed Value?

A: This a governmental function performed by a Local Government Unit (LGU) through the Provincial, City or Municipal Assessor’s Office. It is done for taxation purposes. The assessed value also serves as basis for payment of real property taxes (RPT) which can be done either annually or quarterly.

Q: How is Assessed Value computed?

A: The FMV is multiplied by the assessment level of the corresponding LGU. This is a percentage rate approved through ordinance.


Assessed Value = FMV x Assessment Level

Assessed Value = Php 3,000,000 x 15%

Assessed Value = Php 450,000


RPT = Assessed Value x RPT Rate

RPT = 450,000 x 3%

RPT = Php 13,500

Q: What are the similarities between Appraised Value and Assessed Value?

A: These values have little in common with the exception of the near indispensable use of FMV to complete their formulas. The person doing either the appraisal or assessment is a qualified professional and is a disinterested third party to the sale.

Q: What are the differences between the Appraised Value and Assessed Value?

A: Below are the differences:

 Appraised ValueAssessed Value
EntityPrivate Government
  • Income Capitalization
  • Cost Summation
  • Sales Comparison
Assessment levels determined by ordinance which could vary depending on the LGU
AppealableNo, but the second opinion is possibleMay be appealed to the Local Board of Assessments with 60 days from receipt of notice of assessment
AmountsHigher, based on property valueLower, based on the tax to be paid
PaymentAs service feeAs tax


Sources: Real Living PH


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