Property taxes are based on two variables - the rate and the assessment.

The assessment is the valuation of the property for tax purposes. The assessed value can differ considerably from the market value, however. Many communities do not assess at 100%, meaning the assessment is deliberately lower than the actual value. In other cases, the assessment may be several years old and outdated.

The rate is the percentage of the assessment that is payable in tax each year. Thus, a home assessed at $200,000 in a community with a 2.5% rate would have a property tax bill of $5,000 annually.

Reassessments can cause the property tax bill to rise substantially in some situations, so if you purchase a home that has a very outdated assessment, you should be prepared to face a higher tax bill at some point.