Are Property Assessments a Good Way to Estimate Market Value?
Each January homeowners in Calgary are mailed their property assessments, ultimately learning at what market value the city will base their upcoming property tax bill. For some, the number remains somewhat similar year to year, while others may be shocked at how high or how low their assessment comes in.
When it comes to real estate, a common question among buyers and sellers is this: “Are property assessments a good way to estimate market value?” The short answer to this question is no. In fact, as Realtors, we rarely take property assessments into account when evaluating the market value of a home.
Here is why:
Certain details are ignored
When calculating your property taxes the City takes only a few details into account: lot size, square footage of your home, year it was built, basement development, and any location factors like backing to a park or location on a busy road. While any additions or renovations to the home that were done with permits are also taken into account, the City does not take into consideration the quality of the craftsmanship, quality of fixtures/ finishes, or whether the renovations have added or detracted from the home appearance and functionality in the eyes of a prospective buyer - real estate professionals know that these are the elements that truly add resale value to a home. Further - any renovations or updates done to the home that didn’t require a permit, or that were never permitted are not reflected in the assessed value.
The City doesn’t inspect each property
Although the City uses a similar approach to Realtors and Appraisers when preparing their property assessments, they do not enter and inspect homes prior to making their evaluations. The condition of a home is incredibly important to prospective home-buyers, meaning market value can fluctuate quite dramatically based on interior condition. It is incredibly hard to be accurate with a value assessment without seeing a home in its entirety.
Most homeowners don’t dispute their assessments
Although it isn’t uncommon to receive an assessment that is completely OFF (we have seen assessments ranging from $50,000 - $250,000 high or low!), most homeowners don’t take the time to fight their assessments. While there is a customer review period between January 5 and March 6, most homeowners do not take the time to dispute, once again meaning this number is not a completely accurate display of a home’s true value. This is especially true when the assessment has come in low, as fighting to correct it would then mean a higher tax bill!
The property assessment is out dated
Property assessments are mailed out in January of any given year, but the data represents an estimated value from six months prior (July 1st of the previous year). That means by January, these numbers could have already shifted based on market fluctuations plus any number of changes made to the property - especially if a home is being prepped to be listed. The older the property assessment, the more likely it no longer reflects the current marketplace.
The bottom line - Ask your Realtor!
All in all, if it gives you peace of mind to review the most recent property assessment to gage the value of your new home, take a peek. However, the most accurate reflection of market value will be through your competent and experienced Realtor, who knows that community and square footage are not the only elements of a home to consider when assessing market value.
It is your real estate agent’s job to guide you in the right direction and provide you with the finite details about any given property. If you are curious about what adds/detracts value from a home… ask! Many agent’s will not consider a property assessment a good way to estimate the true value of a property. Look for other details, if there was a renovation, did it increase the look AND functionality of the home? Was a recent addition completed to code, done well and did it add useful extra living space to the home? Are the fixtures and finishes of high quality and installed correctly? Have the windows or roof been replaced recently? These items add IMMENSE value and do NOT require a building permit - therefore, they are likely to be unrepresented in the City assessment.