I often have Buyers ask me why the asking price for a home is different than the assessed value, and Sellers often show me their assessment when we’re chatting about their homes market value. Why is there such a different between these numbers?
During a purchase and sale, you will likely come across three different types of values for a property: assessment value (determined by the Government), appraisal value (determined by a third party appraiser) and market value (determined by you and your Realtor). Here’s some information about each one:
BC Assessed Value
Your property’s assessed value is determined by BC Assessment, which is agency responsible for assessing property value in BC. This agency determines a mass appraisal system used to calculate the value of a home, considering lot size, house type, age, size, building materials, neighbourhood, etc, often when the properties are originally constructed.
When was the last time a BC Assessment Agent has come into your property to note your home features? Exactly, there isn’t enough man power to send an agent to every single property to do individual assessments, so the assessments are done using a mass calculation. At the end of the day, a mass calculation of property value change cannot possibly take into account all the details that leads one property to be valued more than another. For instance, if the basement suite in your home is unauthorized, BC Assessment won’t know about it and won’t be able to take that into consideration when it comes to the value of your home compared to your neighbour without a finished basement.
Realtors don’t consider assessed value in the Real Estate Market value of the property. We are the professionals who are constantly viewing homes, comparing properties, gathering previous list and sales prices, researching building materials and maintenance, watching neighbourhoods change and helping people buy and sell properties for prices they are comfortable with on a daily basis. On the flip side, BC Assessment does consider the real estate market in their valuations – i.e. the East Van detached market has been popular for Buyers in the last few years, and the assessed values have increased across the board. Last year, all properties on Vancouver’s Westside decreased in BC Assessed Value – does that mean their Real Estate Value decreased by the same amount, overnight? I can assure you, it didn’t.
Remember, your property tax is based on the BC Assessed Value (along with a few other factors) – an increase in your property’s assessed value means an increase in your property taxes. You are allowed to appeal your BC Assessed value, for being either too high or too low. You’ll have to prove it’s worth to the city, which may mean an Assessment agent may come and view the property.
Appraised Value
The Appraised Value of your home is a number determined by a licensed Appraiser – someone hired by the bank or mortgage lender to act as a third party property value appraiser. They’re job is to ensure that the property’s value is consistent with the down payment + loan in case the homeowner defaults on their mortgage, forcing the lender to sell your property to retrieve the money owed to them. As long as the property appraisal indicates that the mortgage lender can get their money back in a sale, they’re happy.
Appraised value is also used for a few other scenarios: mortgage re-financing, divorces, noting current value for accounting purposes when turning the property to/from an investment, etc.
As a realtor, I see Property Appraisers do their job often. All I can say is that they’re in the property for a few minutes, take a few photos, ask the Realtor some questions, and check that certain basic features are included. They then use the same sales data that we’re looking at determine a value. They don’t spend as much time determining current quality of the interiors, exposure, curb appeal, building quality, etc.
Real Estate Value
Realtors are the professionals who offer the Real Estate Value of your home – as selling agents, it’s our job to get you top dollar when you list your home for sale. Using comparable market data, neighbourhood knowledge, building history/maintenance information, specific unit details, and current real estate trends, we determine a market value for your home – a number that represents what your home can be sold for in the current real estate market. We note interior and exterior details including everything from lot size, house type, size, age, building materials, renovations/upgrades, outdoor space, views, exposure, strata information, features (like in suite laundry, storage, parking, etc), restrictions, neighbourhood, noise, previous sales, market trends, home staging, negotiation and future potential. We spend a lot of time viewing properties and watching the market’s ebbs and flows (Buyer’s market? Seller’s market?) to determine slight differences in price.
Real Estate Value is what your home should sell for in the current real estate market, within a reasonable period of time, purchased by a typical buyer. We are using our industry knowledge to determine that value.
Real Estate Market Value is often more than the Assessed Value. This is thanks to the Real Estate Market jumping ahead in value years ago, with BC Assessment left to catch up. Often if you see a Realtor market a unit as being “cheaper than assessed value” they are only doing that for the attention grabbing value – it sounds like you’re getting the elusive “deal” whereas, the city may have overassessed the unit years ago and it hasn’t been corrected given the current state of the home.
For more information..
If you’re thinking of selling your home, contact me at 778-387-7371 or kristi@realestatevancity.ca to give you a sense of not only it’s value, but also what we can do to stage, market and negotiate to help you get the highest possible price in today’s market.