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How come the government can value a home more than was paid for the house?
When a house is sold at a foreclosure auction, the selling bank usually does not provide the guarantees that a normal house seller provides.  Furthermore, the previous owner may have neglected the property, and/or spitefully damaged the property.  Bank-owned properties are often neglected and/or vandalized.  Banks are usually too short-sighted to properly market the real estate they own, and do a poor job of making it easy to buy the property. Thus, foreclosure sales usually happen at a price that is significantly below the "fair market value" of sales between competent households.  It is common for a house that is worth $ 125,000 (even in a depressed market) to sell for only $ 100,000 in a short sale or foreclosure. It is possible that this property sold for an even larger discount.  It is also possible that the tax assessor is (inadvertently) comparing a run-down property with well-maintained properties that have extra expensive features, without fully adjusting for the properties' conditions and features.  In the latter scenario, the property owner can ask the tax assessor to re-consider the assessment.  Usually this request is called an "appeal".