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Assessed Value and Market Value: What's the Difference?
Dated: November 24 2020
I once showed my own listing to a potential buyer who took delight in pointing out what he saw as the property’s innumerable deficiencies. I’m a pretty open-minded fella and I've learned there’s usually little point in arguing with someone who’s already made up their mind, so I nodded my head, tried to smile, and said “Hmm…” and “Uh-huh,” a lot. When he was done verbally tearing the property to bits, my interlocutor demanded to know why we had priced our condo as we had.
“Well,” I said, “what price would you suggest?”
“Assessed value!” my little friend cried. “Assessed value!”
And in fact our list price was well above assessed value, because in this particular case I knew that the assessed value was far too low. How did I know that? I’m a real estate agent - that’s what I do.
In the end we sold the condo for a lot more than my little friend wanted to pay, because the assessed value was below the market value of the property, and market value is what counts.
BC Assessment is a Crown corporation that produces annual property assessments for all property owners in the province. Tax authorities use these assessments to determine property taxes.
Assessment values are determined in July and released in January of the next year, so if you were looking at the assessed value of a property in November this number would be almost a year and a half old. Obviously, this could not be relied upon as an accurate snapshot of the home’s current market value.
Furthermore, BC Assessment is tasked with providing values for over two million houses and condos across the province - there’s no way they could personally visit each property, and they don’t. The assessments are based on aerial and street-front imagery, building permits, land titles, and real estate transactions. These are perfectly reasonable sources of information, however, without an in-person visit, the picture by necessity remains incomplete.
A home’s market value is whatever a buyer is willing to pay: by definition, it can’t be known until after the home is sold. Regardless, the REALTOR®’s most important job is to help their clients estimate market value: buyers so they don’t overpay and sellers so they receive what their home is worth.
Some of the factors that contribute to an estimate of market value are:
- Interior layout and design
- proximity to transit, shopping, and schools
- Garage and parking
- Upgrades and renovations
- Lot size and configuration
- Strata issues such as monthly fees, reserve funds, and maintenance
- Current real estate market conditions (demand and supply, multiple offers, etc)
- Recent comparable sales
- Marketing of the property
- Emotional attachment of the buyer
Out of 314 homes sold in the Victoria Core in October, 2020, only nine sold for their assessed value. Forty-seven sold below assessment, while fifty-six sold for 25% over assessed value or more.
Despite these broad variations, assessed value isn’t a useless figure in a real estate transaction. It is a valid data point and can be used to help estimate market value. But don’t make the rookie mistake of overestimating the significance of a home’s assessed value - it’s only one piece of the puzzle.
A Victoria resident for over 20 years, I grew up in Halifax and studied at Dalhousie University, Concordia, and the National Theatre School. Several years in the music industry then led to an extended....
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I once showed my own listing to a potential buyer who took delight in pointing out what he saw as the property’s innumerable deficiencies. I’m a pretty open-minded fella and I've learned