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Buyers: Tax Assessment Is Not Market Value

Before getting all their emotions typed up in a panicked knot, or taking off on a joyful spending spree thinking the equity in their home is worth far more than it is, homeowners should clearly try to understand one very important thing – tax assessment is not market value of your home in Vancouver BC.

MORE: READ THE ULTIMATE SELLING GUIDE –> Tips for Selling your home.

Tax Assessment is Subjective?

Simply put, the tax assessment on a piece of property is the amount of money the government has decided it needs to collect from property owners for the shared cost of paying for government services and expenses for that political subdivision. The government takes a look at the homeowner’s property, decides what it thinks the market value of their home should be from their perspective and experience, then applies their tax assessment to that figure. The problem today is that home markets and values have changed drastically, making all the government’s past experience in determining property values and assessments unreliable when trying to apply that knowledge to homeowners’ properties today. Worldwide, homeowners have appealed assessments over these discrepancies, often winning themselves huge savings over neighbours with similar homes who didn’t appeal their assessments. In those cases, apparently, homeowners took action once they understood that vital concept – tax assessment is not market value in Vancouver BC real estate or too many other places around the world right now.

MORE: READ THE ULTIMATE SELLING GUIDE –> Tips for Selling your home.

The Real Value

From a quite different perspective, a prospective buyer will look at a property owner’s home, make them an offer they think that home is worth to them, and if the seller accepts that offer or a modified one that both buyer and seller both agree on, then that is the actual true market value of their home. It is the actual value of the home because that’s what it actually sold for in the marketplace on that date.

In all actuality, the market value of any home is what a reasonable buyer actually pays to a reasonable seller for their home in a reasonable marketplace, without duress or any other disadvantage pressing upon an otherwise normal marketplace and otherwise reasonable buyers and sellers. Homes sold under threat of or in actual foreclosure or bankruptcy are not part of a reasonable typical marketplace.

Here is the Catch about Property Values

The catch today is that there is nothing typical about the economic Vancouver condo marketplace at this time. So when looking at the numbers any government assigns for market value and tax assessment now, well, it just can’t be trusted to tell a homeowner any kind of reliable information about the true value or market value of their home.

In fact, the only solid bit of analytical data Vancouver homeowners can rely on in today’s market is that tax assessment is not market.

MORE: READ THE ULTIMATE SELLING GUIDE –> Tips for Selling your home.

Many purchasers are operating under the falsehood that a home’s purchase price needs to be just above its tax assessed value. In other words, they understand that tax assessed is the same thing as “what a home is appraised.”

MORE: Market Value Calculator –> Tips for Selling your home.

This is definitely not the case, but simply this month I’ve met no less than three potential buyers who refused to offer anything higher than the tax assessment value on homes they truly loved.

vancouver property market

To fight this, many Realtors have begun including phrasing like “priced under assessed value” in their marketing materials for the home’s sale. It has not helped. Instead, what’s transpiring is that buyers’ preconceptions are seemingly validated and, thus, endorsed.

Our BC Agents say that “Buyers see such homes as ‘good deals,’ but in truth, they are not.” The ASSESSED VALUE turns out to be figured by the public tax professional. (At BC this was a provincial crown corporation known as BC Assessment.) The entire justification for the assessed worth is to determine taxes; that is all. This value is taken and combined with the tax levels of the area. Such is variant from the FAIR MARKET PRICE. Fair market value proves to be the price that a house can get on the open market. This is the price that educated, motivated, and willing purchasers will offer to procure the property from a seller who is selling of their own free will. Fair Market Value is created by looking to similar properties which have sold in the previous three to six months. (If no comparable houses are available, the timetable may have to be expanded.) Based on these homes’ going prices–these are called “comps”–the agents direct the seller on a fair asking price. Once a price is agreed upon between a buyer and seller, this becomes the fair market value of an exact property.

MORE: READ THE ULTIMATE SELLING GUIDE –> Tips for Selling your home.

Thus, it stands to reason that before making an offer, a buyer could examine comps themselves to come to an understanding of what is reasonable and fair…

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