Something that comes up a LOT in my conversations with clients, is the "ASSESSED VALUE" of properties. Buyers are often concerned when the ASKING PRICE for a property is above its ASSESSED VALUE.
The concern is reasonable. If "the government" says a rancher is worth $400,000 then it seems reckless to pay $500,000 for that property. (But it's normal.)
Below, I'll talk about market value vs. assessed value - and I have pulled together some very relevant, local data to show some relationship trends between these numbers.
What is Assessed Value?
Each property in British Columbia is given an assessed value (updated every year) by the BC Assessment Authority. This system was created for property tax purposes - the local governments need a "fair" foundation upon which to base the amounts they charge to property owners for their property taxes each year. So for example, BC Assessment says a home is worth $555,000 and then the local City or District calculates the tax for that property based on the assessed value.
The assessed value is derived algorithmically, based on a number of factors (e.g., size of the land and house) cross-referenced with SALE PRICE data from the area. But their numbers tend to be low in relation to market value (see below), in part because BC Assessment doesn't always know about the actual number of bedrooms/bathrooms, the quality of renovations in the home, etc. Also, their valuations are influenced by homeowners' ability to challenge the numbers that are provided, providing a feedback mechanism that helps prevent the assessed values climbing too high.
What is Market Value?
Simply put, market value is the price that a property should get on the open market. Usually when a home sells, the sale price is considered to be its market value, as long as the sale was totally organic, i.e., the property was given sufficient exposure on MLS, the participants were acting "normally", etc.
Assessed vs. Market Value - The Data
Are there trends in how BC Assessment's values relate to the actual sale prices of homes? See the data I've pulled out, below. This is showing the most recent properties sold in Nanaimo, using three different property types.
- Detached Homes: Selling for 34% above Assessed Value
- Condos/Townhomes: Selling for 36% above Assessed Value
- Manufactured Homes: Selling for 69% above Assessed Value
Posted by Gerry Thomasen on