WHAT IT MEANS WHEN YOUR ASSESSED VALUE IS NOT EQUAL TO YOUR PROPERTY VALUE
Why doesn’t the assessed value of my home equal its market value?
You may have noticed that the “market value” of your home, or even the price you recently paid for it, differs from the value assigned to it by BC Assessment -in some cases by a wide margin. How could this be? Isn’t there only one true value of your home? As it turns out, for a number of reasons that I will outline here, there isn’t.
Assessed vs. market value
BC Assessment is the provincial crown corporation whose mandate, under the Assessment Act, is to assign values to all properties in British Columbia on July 1st each year. BC Assessment produces assessment data to provide tax authorities with a tax base and other information about properties. In valuing a property, BC Assessment considers its unique traits such as size, layout, age, condition, and location, along with recent sales in the local neighbourhood. The assessed value of a property remains fixed for 12 months (until it is assessed once again). In contrast, the market value of a home is current and can change week-to-week or month-to-month, market value is based on how much someone would be willing to pay for a home at a particular point in time.
So why do these numbers differ?
While the assessed value and the market value of your home should, under normal market conditions, be similar, several factors can lead to differences being seen between the two valuations. First, as noted above, trends in market conditions can see to it that the market value of your home differs - sometimes significantly -from its assessed value. For example, if seller's market conditions have prevailed for an extended period of time - as they have here in Prince Rupert - then it is likely that the market price of your home will be higher than its assessed value. This would increasingly be the case the further away you get from July 1st, as your property’s assessed value remains fixed as of that date for 12 months, while the market value of your home continues to change as it responds to market forces. Another factor that could explain the difference between your home’s assessed value and its market value is any renovations that have been done.
Improvements to the interior of your home - upgrades to kitchen, finishing the basement, etc - would likely not be considered by BC Assessment when valuing your home, as BC Assessment appraisers don’t evaluate property interiors. At the same time, home improvements would certainly boost the marketability of your home and, hence its market value.
Finally, outside of general market factors, the ultimate value of a home to an individual will be a function of their personal situation, feelings, and beliefs. For example, while the existence of a hot tub in the backyard may be seen as a plus for some, it may be perceived as a negative for others, particularly if they have kids and there are concerns about safety. As another example, if someone has recently sold their home and they are feeling pressure to find a new home, they may pay more than the home is “worth” to ensure they have secured a place to live.
Find your home's true market value
So, what is the best way to find the true market value of a home? While the assessed value will give you some guidance, it is important to consider current market factors. Professional appraisers can provide an accurate and objective value of a house or condominium. And hiring the right Realtor can help you assess fluctuations in the market and provide an analysis of what similar properties in a similar neighbourhood are currently valued at.
How does a Realtor® determine your property value?
A Realtor® uses the Multiple Listing Service (MLS) and its current market analysis data to compare your property with similar properties that have recently sold in the area. The key word is similar. Realtors® also do a thorough walk-through of your property, both inside and out, to note specific details about your property that either set it apart in a positive way, or may need attention in terms of home improvements, and/or repairs and maintenance. This walk-through combined with the MLS data is how a Realtor® establishes the market value of your property.
In neighbourhoods where property lots and houses are similar, the estimated values will be similar as well. In the case of unique homes such as character homes, this is where establishing value becomes more challenging. Subtle differences with unique homes are hard to summarize in a data table and are difficult to equate value to, much like homes with ‘views’ where the question becomes, is the view worth $50,000 or $100,000?
In the end, with unique properties, that’s when it depends on who is buying. And that’s where the experience and expertise of Kenn Long come in to help establish a property value for your home that truly is the right fit!To summarize
- Do not assume the assessed value of your home reflects its fair market value.
- Do keep renovations in consideration. Most times, the assessed value will not take home renovations or improvements into consideration.
- Do consider using a Realtor to evaluate the home and compare market statistics to best determine fair market value.
Looking for the market value of your home? Call me, I can help!