Why are Homes listed for more than Their Assessed Value?
We have a lot of Buyers who are curious as to why the property assessment is typically much less than the listing price. At the end of the day, your property will have a few different types of value, determined in different ways and used for different purposes: assessed value, appraised value and real estate market value.
BC Assessed Value
Assessed value is determined by BC Assessment, and agency responsible for assessing real property value in BC. This agency visits properties and neighbourhoods to determine a mass appraisal system used to calculate the value of a home, considering lot size, house type, age, size, building materials, neighbourhood, etc. When was the last time a BC Assessment Agent has come to 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 they’re done using a mass calculation. If the city sees that all detached homes in East Van are increasing in value, they will increase the property assessment for each one by a percentage of it’s previous years value – but what if that home had been renovated in the last year? What if a home suffered significant damage and was never fixed? What if the last time a BC Assessment Agent saw your home was 20 years ago? 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.
Say your purchase a 2 bedroom condo for $400,000 that needs a complete renovation. After putting $100,000 into the unit it looks beautiful. The city won’t know that you put these renovations into the unit and will assume that it’s still only worth something close to the value it was previously. If you took out a building permit with the city to add more sqft to your home, your assessment will likely go up since they now know this information first hand.
Realtors don’t consider assessed value in the Real Estate value of the property. We are the professionals who are out on foot viewing homes every day, 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 – 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.
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 to retrieve their money. Lenders don’t want an overestimated value of your home because they might end up as default owners if you default on your mortgage. As long as the property appraisal indicates that they can get their money back, they’re happy.
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 us (the professional Realtors!) some questions, and check that certain basic features are included.
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 for your home. 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?) 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. At the end of the day, real estate value is whatever a Buyer will pay for the home – as realtors helping you sell your home, 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 city 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.
Assessed Value vs Appraised Value vs Real Estate Market Value
If you’re thinking of selling your home, contact a realtor (email me!) 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.