PROPERTY VALUE vs PROPERTY ASSESSMENT
iN SUMMARY:
The BC assessment is not a reliable source to determine the fair market value of your property.
The value on the BC assessment was determined in July of the previous year. It is very plausible that the market may have changed a bit since then, and not in the direction you might think.
Do not rely entirely on the buyer’s opinion or the seller’s opinion in an unlisted private transaction for a fair market value.
Do not rely entirely on your neighbours, friends, or family members opinions for a fair market value of a property.
Do consider ordering a market appraisal, but do not rely on it 100%…
Do consider an evaluation by an experienced, active, local Realtor or two. This in combination with a market appraisal is the best indicator of current fair market value.
Gather professional opinions from Realtor(s) and an Appraiser – these are the people with their feet on the ground and their heads in the game.
The Details:
Provincial Property Assessment notices have arrived in the mail this month, and some homeowners are glowing with big smiles on their faces and more spring in their step, while others are sad and stressed- second guessing their purchase- at a modest gain or decrease in assessed value.
On a side note, it never ceases to amaze me the elation on a person’s face when they see their Property Assessment higher than the previous year, despite this meaning that they have to pay more property taxes (more than likely).
But wait a minute, neither this assessment document nor either parties’ emotions, are tied to a current true market value of their respective properties. In fact provincial property assessments have a history of being out of whack. They can be significantly too high or too low. This is in large part due to the facts that a) values are determined in July of the previous year, and b) properties are rarely visited in person by provincial appraisers.
Provincial property assessments should then never be solely relied upon as any sort of relevant indicator of true market value for the purposes of purchase, sale, or financing of said property.
The assessed value instead should be thought of as something akin to a weather forecast, spanning far larger and more diverse areas than the unique ecosystem that is your neighbourhood, your specific street, or your specific property. A weather forecast made the previous July, not the previous week. That’s right this is when assessed values are locked in, a full six months prior to the notices being mailed out.
The BC Assessment Authority does offer some useful tools for a high-level view of the market. You can go to http://evaluebc.bcassessment.ca/ and start by 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 is also an interactive map as well as links to information on nearby properties and sample comparative sold properties.
Neighbouring proeprties:
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 of reference. But if you are trying to determine a selling price on your own property, you should always enlist a professional. Valuing your own property is not a do-it-yourself project. In a buying/selling transaction your are best to order an appraisal, which is a much more accurate reflection of current market value. 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 unbiased third party offering an objective valuation of the property in question.
What is 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 often demonstrate no clear relationship between sale price and assessed value. It’s often all over the map. Some properties might be selling well below assessment, and others could be selling well above.
You also want an experienced and local 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 than does a government document, 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 their reports are often seen as less biased. Imagine your reaction, as a buyer, to the following statements…
- The seller says their house is worth $500,000.
- The sellers’ Realtor says it’s worth $500,000.
- This house is listed at $500,000 based on a professional (market) appraisal.
Most buyers would consider #3 the most reliable of the above statements. And most buyers requiring financing will have the benefit of the lender ordering their own independent appraisal to confirm fair market value. Sellers, on rare occasion order an appraisal in advance, which can create an interesting situation.
In practice, Realtors are relied upon for listing price estimates. Most buyers aren’t too concerned with what anybody else thinks the house is worth. Most buyers care about what they think it is worth. This is why we say that market value is ultimately determined by what a buyer is willing to pay for the home, somewhere in between what they are willing to pay and what the seller is willing to accept.
It is important to note that there are two kinds of professional appraisals. There is the market 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. The financing appraisal essentially answers the question; “is this property worth the agreed upon purchase/sale price.”
A marketing appraisal goes more in depth (and also costs more) but a lender is not concerned with the actual market value over and above the purchase/sale price. A lender is simply concerned with the answer to the simple question. It is a rare day that the appraisal for financing has a value that differs significantly, if it all, from the sale price. Therefore one should not be surprised if, when buying a home, they find that the appraisal comes in bang on at the purchase price. As they do 99% of the time.
The rare occasion around 1% of the time that the value is off is almost always in the event of a private transaction where the seller has had no professional guidance at all and has set their price below market by relying on something as inaccurate as their BC Assessment document.
