The dollar figure on your provincial property assessment notice should not be taken as your home’s market value, explains mortgage broker Dustan Woodhouse [updated]
BC 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.But hold on a sec. Neither this assessment document, nor either parties’ emotions, are tied to a current true market value. 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 solely 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, your specific street, or your specific property. A weather forecast made the previous July, not the previous week.
As 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. 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 single 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 property is a manufactured home or multi-family 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. Valuing your property is not a do-it-yourself project.
In a buying/selling transaction, it is 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 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 often demonstrate no clear relationship between sale price and assessed value. It’s often all over the map. Some properties selling well below assessment, and others well above.You also want an experienced and local REALTOR® to help you determine the selling price of your home. A (busy, local) agent 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 real estate agent 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’ listing agent says it’s worth $500,000.
- This house is listed at $500,000 based on a professional (marketing) 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 rarely order an appraisal in advance, which can create some interesting situations.In practice, agents are relied upon for listing price estimates. Most buyers don’t care much about what anybody else thinks the house is worth. Buyers care 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, aligned with what is acceptable to the seller.The Two Kinds of Appraisals
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 more a matter of 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 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 per cent of the time. The one per cent of the time that the value is off, it is almost always a private transaction where the seller has had no professional guidance at all and has inadvertently set their price below market, by relying on something as inaccurate as their BC Assessment document.
In summary, rather than relying on your out-of-date BC Assessment for your home’s value, you should gather professional opinions from real estate agent(s) and an appraiser – these are the people with their feet on the ground and their heads in the game.