How to determine real value when buying or selling a Calgary home.
It’s not uncommon for sellers to come to us with misconceptions about their home's true market value because they’ve just received their City of Calgary property assessment.
But many buyers and sellers are surprised to find there is often a notable difference between the assessed value of their home and the market value that a professional Realtor® estimates.
So which appraisal method is the right one to use when buying or selling a house, and what accounts for the discrepancy?
Let’s take a closer look.
The Difference between Assessed Value and Market Value
First things first, let’s outline the difference between assessed value and market value.
The assessed value of your home is the amount the city determines your home is worth for the sole purpose of collecting taxes you must pay for owning the property.
Calculating assessed values allows the city to make probable forecasts about the revenue it will collect from property taxes based on shifts in the real estate market.
On the other hand, market value is how much your home is worth on the real estate market today. True market value is decided by the amount a buyer is willing to pay and at what price a seller is willing to sell for at any given point in time.
Not surprisingly, market values typically vary from assessed values.
Why are there always discrepancies between the assessed value of a home and the real market value?
When you consider how the city assesses home values, it’s no surprise we see discrepancies between the assessed value and market value.
To determine the value of your home, the city uses a mass appraisal method, which evaluates the value of a larger group of houses as of a specific date based on sales comparisons in your neighbourhood — in Calgary, July 1st of the previous year.
When using the mass appraisal method, the city does not look at all property-specific things that make your home unique to other homes in the area: important details like curb appeal, sale-ability, upgrades and renovations.
When a Realtor® helps you price your home, they determine current market value based on these considerations and more recent history (90 to 180 days) of comparable sales in your area.
If you really think about it, true market value (the exact price a buyer is willing to pay and seller is willing to sell) is almost the opposite of mass appraisal.
No wonder there’s a difference!
So what does the city assessment mean for you as a home buyer or seller?
We generally tell clients not to place too much stock in assessed value. Unless they’re trying to determine how much they’ll need to budget for property taxes.
Realistically speaking, when given a chance to pay fewer taxes, most homeowners aren’t calling the city to challenge the assessment because it was too low.
The bottom line is that if you are considering selling a Calgary home, don’t be attached to the most recent valuation on your property assessment.
If you’re looking to determine the real market value of your home based on current conditions, give us a call. We’d be happy to help!