4 Feb 2016

Property Assessments vs. Market Value

Property Assessments vs. Market ValueShort Version:

Do not rely on BC assessment for a value.

Do not rely on a buyer in a private transaction for a value.

Do not rely on your neighbours, friends, or family members for a value.

Do consider a marketing appraisal, but do not rely on it 100%.

Do consider the evaluation by an experienced, active, local Realtor or two, ideally in combination with a marketing appraisal.

Gather professional opinions from people with their feet on the ground and their heads in the game.

Thank you.

Long Version:

Provincial Property Assessment notices have arrived in the mail, giving some homeowners a big smile and a bit more spring in their step (increased property taxes aside), while others wilt and lament at a modest gain or decrease in assessed value.

Hold on, though. Neither party’s emotions are tied to a true market value, and in fact, provincial property assessments can be significantly too high or too low. Values are determined in July of the previous year, and properties are rarely visited in person by provincial appraisers.

For this reason, provincial property assessments should never be relied upon as any sort of relevant indicator of true market value for the purposes of purchase, sale, or financing.

Think of the assessed value instead as something akin to a weather forecast, spanning far larger and more diverse areas than the unique ecosystem that is your neighbourhood, street, and specific property.

With that in mind though, the BC Assessment Authority does offer some useful tools for getting a high-level view of the market. Go to http://evaluebc.bcassessment.ca/ and start typing an address. You’ll get a drop-down window where you can click on the address you want. Here’s what you can find out:

Details on one address

These come up on the first screen and include: current and last year’s assessed value; size and rooms; legal description; sales history, and further details if the property is a manufactured home or multifamily building. There’s also an interactive map as well as links to information on neighbouring properties and sample comparative sold properties.

Neighbouring properties

Here you can compare the assessed value of houses in the immediate neighbourhood. Clicking on any property brings up further details.

Sample sold properties

Find comparable properties and see what they sold for and how their sold price compares to their assessed value. This is a great research tool for owners, sellers and buyers.

These tools can be a starting point, but if you’re looking to set a selling price on your own property, always enlist a professional, and ideally in a transactional situation, order an appraisal, which is a much more accurate reflection of current market values. It is timely and reflects value for zoning, renovations and/or other features unique to the property. An appraiser is an educated, licensed, and heavily regulated third party offering an unbiased valuation of the property in question.

What’s my home really worth?

Usually, market value is determined by what a buyer is willing to pay for a home, and what the seller is willing to accept.

A quick survey of recent sales and their relation to assessed values will tell you that there seems, in fact, to be no clear relationship between sale price and assessed value. It’s all over the map.

Ideally, turn to an experienced Realtor to help you determine the selling price of your home. A busy, local Realtor will have a far better handle on what is happening in your area for prices, and in many instances will save you from yourself.

In theory, a comprehensive current market review completed by a Realtor should not differ radically from the value determined by a professional appraiser.

Professional appraisers spend all day every day appraising properties, and, unlike a Realtor, they are paid for the work they do, and their reports are often seen (by buyers) as less biased. Imagine your reaction, as a buyer, to the following statements…

  1. The seller says their house is worth $500,000.
  2. The sellers’ Realtor says it’s worth $500,000.
  3. This house is listed at $500,000 based on a professional (marketing) appraisal.

Most buyers would consider #3 the most reliable. However, they will be ordering their own independent appraisal anyways.

In practice, Realtors are relied upon for listing price estimates. Most buyers don’t care much about what anybody else thinks the house is worth; they care what they think it is worth. It matters little what the professional appraisal says. This is why we say that market value is ultimately determined by what a buyer is willing to pay for the home, aligned with what is acceptable to the seller.

It is important to note that there are two kinds of professional appraisals. There is the marketing appraisal, such as one ordered by a seller. And there is the financing appraisal, which is done so the bank is satisfied the house is worth what the buyer and seller have agreed it’s worth. The financing appraisal is a less in depth review and is essentially answering the question; is this property worth the agreed upon purchase/sale price.

A marketing appraisal goes deeper (and costs more) but a lender is not concerned with the actual market value over and above the purchase/sale price. A lender just wants the simple question answered. It is a rare day that the appraisal for financing has a value that differs significantly, if it all, from the sale price. Therefore I don’t think one should be surprised if, when buying a home, they find that the appraisal comes in bang on at the purchase price. They usually do.

In summation

Do not rely on BC assessment for a value.

Do not rely on a buyer in a private transaction for a value.

Do not rely on your neighbours, friends, or family members for a value.

Do consider a marketing appraisal, but do not rely on it 100%

Do consider the evaluation by an experienced, active, local Realtor or two, ideally in combination with a marketing appraisal.

Gather professional opinions from people with their feet on the ground and their heads in the game – like the mortgage professionals at Dominion Lending Centres.

Dustan Woodhouse

Dustan Woodhouse

Dominion Lending Centres - Accredited Mortgage Professional
Dustan is part of DLC Canadian Mortgage Experts based in Coquitlam, BC.

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