Assessed Value vs Market Value in BC: Understanding the Difference
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by Richard Morrison
- June 15, 2021
- Buyers
- 0
Determining the true value of your home can be confusing. You likely receive a property assessment notice from BC Assessment each year with an assessed value. But is this the same as the market value – what buyers are actually willing to pay?
The differences between assessed value and market value are important to understand, especially if you plan to sell your home. This guide will explain how each value is determined in British Columbia and why there is often a discrepancy between the two.
Keep Reading:
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- Asking Price vs Selling Price: Determining Fair Market Value
- Closing Costs of Buying a Home in BC – A Detailed List
- How to Know If the Title of the House is in My Name in BC
- Tips for Selling Your Home – Guide for Vancouver
How Assessed Value is Calculated
The BC Assessment provides property owners with an estimated value of their home each year. This assessed value is used to calculate property taxes owed to local and provincial governments.
As it’s not feasible for appraisers to visit every home, assessed values are calculated based on:
- Location
- Lot size
- Home square footage
- Age and condition
- Additions like decks and garages
- Sales prices of comparable homes from the previous July
So the assessed value is based on limited information from 6+ months ago. It does not reflect renovations, interior upgrades, or current real estate trends.
Why BC Assessment Value Differs from Market Value Of Your Home
Market value is what a buyer would pay for your home today, based on current market conditions. This is influenced by things like:
- Desirability of location
- Interior finishes and layout
- Proximity to transit and shops
- Property age and upgrades
- Outdoor space and parking
- Local inventory and buyer demand
As the real estate market rapidly changes, assessed value can lag far behind. It’s set months earlier and doesn’t account for factors obvious during a property tour. Don’t rely on assessed value to know your home’s worth.
What Impacts Your Home’s Actual Market Value
Market value is what a ready and willing buyer will pay for your home in its current condition. Real estate agents determine this number by thoroughly touring and assessing all aspects of the property.
Factors that influence market value include:
- Interior layout and design
- Proximity to transit, shops, schools
- Age and maintenance
- Lot size, topography, trees
- Total square footage
- Upgrades like flooring, kitchen, bathrooms
- Strata fees and contingency fund (for condos)
- Comps – recent sales of similar homes
- Current real estate market conditions
- Buyer demand and emotions
So market value provides a complete, real-time snapshot of what your home could sell for.
Key Differences Between Assessed and Market Value
There are a few key reasons assessed value often does not equal market value:
- Assessors don’t see the home in person like real estate agents do
- Market value accounts for many more factors
- Assessed values are 6+ months out of date from market values
Replacement Value for Insurance Purposes
Replacement value is used for homeowners insurance. It’s the full cost to reconstruct your home from scratch in the event of a total loss. To determine this, insurers consider:
- Building materials, finishes
- Number of stories, bedrooms, baths
- Square footage
- Labor and permit costs
- Meeting updated building codes
Replacement value is higher than the building value on your assessment. Your home can’t be replaced with another 40 year old structure! Review your policy yearly and update for renovations.
Determining Your Home’s True Value
Don’t rely solely on your property assessment to know what your home is worth. To get an accurate estimate of its market value, consult a local real estate professional. They will provide a detailed valuation after touring your home and reviewing recent area sales.
Did you know that 74% of BC homeowners say their assessed value does not match what their home would sell for, according to a survey by Richard Morrison?
Getting an Accurate Market Value Assessment
Don’t stress if your assessed value decreases – it may not impact what buyers will pay. To get a true gauge of your home’s market value, have a real estate agent tour your property. They’ll assess its current condition and comps to provide an up-to-date estimate.
A proper market valuation ensures you:
- Price your home correctly when selling
- Don’t overpay if buying
- Get the right insurance coverage
Benefits of an appraisal
An appraisal to determine the market value of a home can provide several benefits. Firstly, it helps differentiate between the market value and the assessed value of a property. While the assessed value is used by tax authorities to determine property taxes, market value is the price that buyers are willing to pay to purchase the property. This information is valuable to home sellers as it helps them set a realistic asking price.
Additionally, a current market appraisal provides an accurate reflection of the housing market and its trends. This assists home sellers in making informed decisions about the listing price and potential negotiations. Conversely, buyers can also benefit from an appraisal as it ensures they are not overpaying for a property.
Furthermore, an appraisal can also provide vital information about the home, such as the existence of any potential issues, such as large trees with roots that may impact the property. Overall, a market appraisal offers a more comprehensive and accurate understanding of a home’s value, taking into account factors beyond just the municipal and provincial property assessments.
FAQs:
Q: What is the difference between assessed value and market value?
A: The assessed value of a property is the value assigned to it by the BC Assessment Authority for property tax purposes. It is used by tax authorities to determine property taxes. The market value, on the other hand, is the amount that a buyer is willing to pay for the property in the current real estate market.
Q: How does BC Assessment determine the assessed value of a property?
A: BC Assessment appraisers take into account various factors, including the property’s characteristics, location, recent sales of similar properties, and other market data, to determine the assessed value of a property.
Q: Why is there sometimes a discrepancy between the assessed value and the market value of a property?
A: The assessed value is determined based on the information available to BC Assessment, while the market value is influenced by factors such as buyer demand, changes in the real estate market, and individual negotiations between buyers and sellers. As a result, it is not uncommon for there to be a difference between the assessed value and the market value of a property.
Q: How is the market value of a property determined?
A: The market value of a property is determined by the buyer’s willingness to pay to purchase the property. It takes into account factors such as location, condition, size, and other features that may affect the value in the real estate market.
Q: Can I use the assessed value of my home as an indication of its market value?
A: While the assessed value can provide some insight into the value of your home, it is important to recognize that it is not the same as the market value. The market value is determined by what buyers are willing to pay, while the assessed value is used for property tax purposes.
Q: How often does BC Assessment assess properties?
A: BC Assessment assesses properties annually. The assessed value is based on the value as of July 1 of the previous year.
Q: What role does BC Assessment play in determining property taxes?
A: BC Assessment provides the assessed value of properties to tax authorities, who then use this information to calculate property taxes. The assessed value is one of the factors used in the property tax calculation formula.
Q: Does the assessed value of a property include things like carports or other structures?
A: Yes, the assessed value of a property includes all structures and improvements on the land, including carports and other additions.
Q: Are there any other factors besides the assessed value that affect property taxes?
A: Yes, property taxes are also influenced by factors such as the municipal tax rate, special levies, and any provincial property tax credits or exemptions that may apply.
Q: Can a realtor help me determine the market value of my home?
A: Yes, a realtor can provide you with information about the current real estate market and help you determine the market value of your home based on recent sales of similar properties and other market data.
Sources:
https://info.bcassessment.ca/Services-products/Understanding-the-assessment-process/market-value-and-property-assessment
https://www.forbes.com/advisor/mortgages/assessed-value-vs-market-value/
Ready to turn your real estate dreams into reality? Contact Richard Morrison, Vancouver’s top realtor with 20+ years of experience. As a Medallion Club member and RE/MAX Hall of Fame award winning agent, he’s the expert you need on your side. Whether buying, selling, or investing, Richard’s personalized approach and deep market insights ensure a successful transaction. Reach out to Richard today at (778) 900-2235 and make your real estate journey seamless and rewarding.
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