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You open the letter and one word stands out: assessment.

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So what is this? A notice? A bill? A receipt? And, more important, what does it mean for your bank account?

What is a property assessment?

A property assessment is a value assigned by a government agency on a piece of real estate. The assessment does not necessarily reflect the home’s market value. Instead, it is a tool for calculating property taxes.

Here are a few tips to help decipher the letter.

1. Who’s it from?

Both assessments and bills would come from your local municipality. But if the letter is from your mortgage servicer, it could be your annual escrow account statement.

Typically, if you have an escrow account, you pay roughly one-twelfth of your annual property tax with every mortgage payment. The servicer saves those amounts and then pays the bill when it’s due. While annual statements vary with the servicer, they document how much the mortgage company put in escrow, how much it paid, and the account balance.

What is an escrow account?

An escrow account consists of money that is set aside for payment of property taxes and homeowners insurance. Each time the mortgage servicer receives a house payment from the homeowner, the servicer deposits money into the escrow account. The amount builds every month. When taxes and insurance payments are due, the servicer pays them from the escrow account on behalf of the borrower.

Another possibility: If your property tax bill has increased, this letter could be a notice that your servicer is raising your mortgage payments accordingly, says David Merriman, professor of public administration at the University of Illinois at Chicago.

Have questions or don’t understand what you’re reading? Call the sender, says Larry Clark, director of professional development for the International Association of Assessing Officers.

But scammers and less-than-honest marketers will send fake notices and bills, too. So if you’re phoning your municipality or mortgage servicer (or visiting online), don’t use the contact information in the letter — get it yourself independently.

2. Does the letter include terms like ‘market value’?

Or does it show your home’s value over multiple years? If so, it is most likely a property assessment notice from your local government, Merriman says.

What this letter likely means: Your municipality has valued your property and is notifying you. Typically, your tax bill (which will come separately later in the year), will be based on a fractional amount of this valuation, says Daniel McMillen, professor of economics at the University of Illinois at Urbana-Champaign.

To avoid confusion, some local governments print “this is not a bill” on their assessment letters, says Clark.

Thinking of challenging that assessment? You often have a limited time (30 days, in some cases) to contest it, so move quickly, Merriman says.

Local governments have a regular schedule for sending out assessment letters and property tax bills — and you want to learn it, says McMillen.

3. Does it include an ‘amount due’ and ‘due date’?

If so, you’re probably looking at a property tax bill, says Merriman.

“The bill will have a dollar amount that you owe, and a date you have to pay it,” he says. “The assessment will usually not have that information.”

Bills will often also include the tax or millage rates for all your home’s jurisdictions (city, county, school district, etc.), Merriman says.

Check the ID numbers used to identify the property, he says. If your property includes multiple parcels, make sure all are included, he says.

Also verify that the bill includes all of your exemptions (homeowner, senior, disability, etc.), Merriman says.

Have an escrow account? See that the mortgage servicer banked enough money to cover the entire bill — and either has paid it or will do so shortly. And verify it with the governmental authority that accepts those payments.

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