Every year, you get a letter from BC Assessment that states the assessed value of your home. But property owners are often let down when they receive their BC Assessment letter; if the value is lower than expected, they fear that this price is what their home would actually sell for.
Here’s what many sellers don’t realize: these two assessments don’t necessarily correlate. You could sell your home for much more (or much less) than your BC assessment indicates.
Why is that? First, let’s make a broad distinction between these two terms:
- Assessed value is determined by BC Assessment. It’s an estimated value that provides the tax authorities a basis to calculate your property taxes.
- Market value is the price a home is listed for when it goes up for sale. It’s typically determined by a realtor. Before a property is sold, the buyer and seller must agree on the price.
As you can see, both values serve two entirely different purposes. One is used to determine taxes, while the other is used when selling a home.
In this blog, we’re going to explore how these values are calculated and which one you need when selling a home:
Assessed Value
Imagine if you had to appraise a home without ever seeing it. All you had to work off of was a few lines of information about its size, construction materials, and location. Now imagine that information was a few years old and didn’t account for recent renovations or additions.
When you consider this, it’s easy to understand why the assessed value is so different from the market value. The government can’t send appraisers to every individual property. Still, they need an estimation of each home’s value to determine property taxes.
Even though you receive your BC Assessment in January, it’s based on an estimation from July 1 of the previous year. This means that it’s not necessarily reflective of the current market.
How is assessed value determined?
As we mentioned, the government can’t send appraisers to your property every year. Instead, the assessed value is calculated based on more general information about your home, including:
- Location
- Size & square footage
- Shape
- Use
- Information about the real estate market during that year
- Age & condition
- Recent sales of similar properties sold in your area
- Lot size
- Topography of the area
- Additional structures (garages, additions, decks)
Given all the factors that affect the actual sale price of a home, this list is scarce. These values are determined by whatever information is available about your property, which may be out of date.
Are you concerned that you’re paying too much in property taxes? You can appeal your BC Assessment by contacting the Property Assessment Review Panel.
Actual Market Value
Before you list your home for sale, you need to find out its actual market value. Determining the price can be tricky; as a homeowner, you can’t separate your sentimental ties to your property from its real estate value. For that, you need an experienced realtor.
You know how unique your home is. To understand its value, a realtor needs to see all its nooks and crannies; the wood trim that’s full of character, the marble countertops in the kitchen, and the 8-person hot tub in the backyard. The market value is based on everything that affects the worth of your home.
A realtor can do a comprehensive appraisal of your home. They’ll combine that with their real estate market knowledge to determine a fair price for your property. Having a sell-side realtor will work to your advantage; they’ll help you get the largest possible return on your investment. Once a realtor determines the value of your home, they’ll help you find buyers willing to pay a fair price for it.
What factors affect the market value of your property?
When a realtor visits your property, they’ll take into account more than its square footage or address. It’s not a black and white calculation; it’s a unique reflection of the current market and your property’s characteristics.
The market value of your home is based on a range of factors, including:
- The layout. Does the interior of your home match the styles that are currently popular?
- Condos. When you’re selling a strata property, there are a few unique factors to keep in mind. How much money is in the contingency reserve fund? Are there any upcoming special levies? And how does the condo board allocate condo fees—are they proactive with repairs, or do they let things deteriorate until a large repair bill comes up?
- Nearby amenities. An appraiser will consider how convenient and accessible the location of your property is. They’ll look at whether it’s near bus routes, groceries stores, or the SkyTrain.
- Size & number of stories. Depending on your buyer, more or less stories may be important. An older couple may be more interested in a bungalow, while a young family may want multiple stories for their children’s bedrooms.
- Age. Character homes may be valued for their unique characteristics, but most homeowners favour modern properties with new roofs, HVAC systems, and electrical/plumbing systems.
- Demand and supply. Are you in a seller’s market or a buyer’s market? If demand outpaces supply, then your home will sell for a higher price than usual.
- Buyer emotion. You can list your property for one price, but by the time everything is said and done, you and the buyer may agree on one that’s quite different.
- Marketing. Ideally, you want as many buyers bidding on your property as possible; this drives up the value of your home. If your home is advertised well, you’ll have buyers flocking to bid on it.
The Differences Between Assessed Value and Market Value
By now, you should have a much clearer idea of why there’s a discrepancy between assessed value and market value. When you compare how assessed value is determined vs. market value, it becomes clear why these two numbers are often quite different.
The real estate market is in a constant state of flux. By the time you receive your BC assessment, six months have passed since the date it was calculated. The housing market can change dramatically in that time—think of what happened in 2020!
In contrast, market value is determined when you list your property for sale. It’s an accurate reflection of your current property value.
You shouldn’t rely on provincial property assessments to determine the current market value of your house. To find out the real estate market value of your property, you need to work with a Vancouver realtor.
Get an Accurate Evaluation of Your Property
Curious about how much your house would actually sell for? Don’t put too much weight on your BC Assessment. Instead, work with a realtor to get an accurate assessment of the value of your property.
To find out more about navigating the real estate market, property tax in Vancouver, and how to sell your home, get in touch with Leo Wilk today.