Are you a property owner? If so, then you know that every year, you can count on a property tax assessment which results in an updated figure for the value of your property.
This assessed value is used to determine how much property tax you will pay, plus gives you an idea what the market value of your property will be.
However, in many instances, these two numbers could look very different.
This can be a cause of stress for a property owner looking to buy or sell in the Nanaimo real estate market – especially since there is already so much to do to get your home listing-ready.
How can you be sure what kind of sale price you will get for your property if the assessed value is much different than the market value, especially during a period of volatility in the market?
Read on for your guide to understanding assessed value versus actual market value, how these values are calculated, and why this information should matter to you.
What is Assessed Value?
Assessed value is a value that is, at its core, determined with a lack of information.
In the British Columbia real estate market, there are limited resources available to determine the value of a property. However, the government still needs to determine a value for all properties so they can be charged property tax.
It would be impractical to send an appraiser to every home in the province, so an alternative method was created.
This process used attributes like the age, size, and location of the property, as well as the construction materials used and sales trends in the area
Much of this information is publicly available, however much of it is private – like recent renovations made by the homeowner.
Recent sales of similar properties in the area also play into assessed value, but this aspect could be less practical in areas with high sale volume, like the Nanaimo real estate market which is cooling slightly after years of record-breaking activity (tk link out to market report when published).
Sales data also becomes less practical when you consider that the assessed value is calculated once a year.
An assessed value for a Nanaimo detached home could have been estimated on January 1st of 2022, but this wouldn’t account for the changes in the market since interest rates began rising (something we cover in our Fall 2022 market report (tk link out to market report when published)).
In conclusion, assessed value is a well-researched guess, although there are many factors that combine to make it potentially ambiguous or inaccurate.
And when you compare it to actual market value, assessed value can seem far off the mark.
What is Actual Market Value?
Determining actual market value accounts for all of the factors that assessed value forgets.
Recent renovations and add-ons, proximity to new amenities in the area, and the “character” pieces that make a home are all accounted for.
This is because an assessed market value is determined by a realtor who will have full visibility into the property.
Aside from the characteristics of the home and property, there are also many market factors to consider, like profiles of the typical buyer looking for property in the area, sales within the past 90 days, and how the realtor can market the property.
For condo buyers and sellers, there are a whole other range of factors to consider.
Contingency reserve funds are a great example. Strata fees go towards common expenses for repairing roofs, elevators, and common spaces.
Special levies and maintenance fees also apply, and understanding these costs depends on insight into how the condo board operates.
This means that two condo properties that are the same age in different buildings can have wildly different actual market values.
This is why it is important to find a local realtor with experience and insight into the market in your city or town.
The final actual market value can be defined in another simple way: as the price that the property would sell for given a willing buyer and seller with reasonable negotiation and a lack of maintenance and legal issues.
So, the market describes the price, and your realtor should know the market.
Knowing Your Property’s Value in the Nanaimo Real Estate Market
Knowing what we know now, it shouldn’t be too much of a surprise that actual market value can differ greatly from assessed value.
The most important lesson of this is that a property owner should not lean heavily on a provincial property assessment to determine the value of their home.
The gap between assessed value and actual market value will always exist, so it’s best to get the best-updated number that you can if you really need it.
If you want to know for sure, ask a realtor to do an assessment. Jeff King Real Estate offers free assessments for properties in the Nanaimo area. Jeff’s experience with buyers in the Nanaimo real estate market is essential to getting an accurate market value.
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