Whenever dramatic changes occur in our Real Estate Market, one of the most hotly debated topics among consumers and Real Estate professionals is the applicability of a property’s Assessed Value (referred to as ‘AV’ in this article) relative to pricing in the open market.
The double-standard relating to AV is just amazing. People want their AV to be as low as possible while living in their home, the idea being that lower Assessment means lower property taxes (FYI mill rates determine this, not necessarily the AV). When they want to sell, they want their AV to be high as it reflects well on their asking price.
Human nature has it that a consumer generally wants to sell for higher than AV but come time for that exact same person to purchase they want to buy below Assessed Value. We hear arguments daily from agents commenting on pricing as it relates to AV, usually at the time an offer is being presented. “Homes in this area are all selling below AV”, said an agent to me recently. Strange, I couldn’t help but notice her own listing in the area was listed $120,000 above AV! When confronted about this discrepancy, her defense was “…the house has been totally renovated…”.
Therein lies the true issue with using Assessed Value to determine pricing. When was the last time an Assessor actually visited the property noting all of the upgrades and value enhancements to the house? Virtually all (at least 90%) of the homeowners I ask have tell me they’ve never had anyone from the British Columbia Assessment Authority (BCAA) through their home. One client had owned their house for 42 years and never once had such a visit! So how is the AV established?
Generally, BCAA takes the last sale price of the property and adjusts annually based on increases or decreases in the marketplace. Permits taken out for renovations at the Municipality are also accounted for.
Problem is, many homes have had cosmetic upgrades and redecorations which would not be known to the BCAA since they neither have access to a permit nor have visited the property. The ensuing effect is that Assessed Values are all over the map, being higher or lower than eventual Sale Price with little or no pattern or justification.
As a Home Buyer, would you pay a Seller a price based on AV? Of course not. You would survey recent sales history in the area to determine a true market value. Market Value is what consumers are willing to pay for properties at a given time.
The bottom line is that the Assessed Value is useful for Municipalities to fairly determine annual Property Taxes but mean little, if anything, to a Buyer or knowledgeable Agent at the time of purchase.
