Many property owners in Vancouver recently received their 2023 BC assessment notices.
But when it comes to buying and selling real estate, are these assessments an accurate representation of market value? Should buyers and sellers rely on them when evaluating properties for the purposes of making an offer or coming up with a list price?
In this report, I'm going to address these questions and also share some sales so that you get a chance to do a side by side comparison of the most recent assessments and actual sale prices.
Main Purpose of Property Assessments
The main purpose of assessments is to provide assessed values to entities such as Municipal Governments, Regional Districts, the Ministry of Education and the Ministry of Health, so that they can use those assessed values to raise money through property taxes to fund services such as public education, health care and community services.
BC assessment states that the fairest way to distribute property tax burdens is by using market values, and as such, they generate assessments based off of what they feel is fair market value. Even though BC assessment agents are doing their best to calculate fair market values, they are not calculating them for the purposes of buying and selling.
In my opinion, buyers and sellers should not be relying on assessments as market values because there are a number of challenges and limitations that affect their accuracy from a buying and selling perspective.
Challenges and Limitations to the Accuracy of Assessments as Market Value
One, a vast majority of the assessments are done from sitting at a desk. It's extremely challenging to get a feel for a property and a neighbourhood without walking through it. I have never done an evaluation for anyone without visiting the property.
There are many factors outside of square footage and the number of rooms that can affect the value of a property, such as updates, the quality of updates, the overall condition of the property, the layout, the number of outdoor spaces, landscaping, just to name a few.
The same goes for lot sizes and locations. Lots can be of the same size but still have major differences, such as facing a park, facing the back of another home, not having a back lane, being on a slope or facing a T intersection.
Two, BC assessment agents are not actively working with buyers and sellers, nor are they working at real estate offices. The Vancouver Real Estate Market is very dynamic. Things change quickly. Online data doesn't account for these immediate shifts in consumer behaviour and sentiment that happen in real time.
And three, even if these assessments were reliable, from a buying and selling perspective, they're calculated as of July 1 of the previous year.
By the time they're posted, they're already six months old. And by the time most buyers and sellers become active in the spring market. They're nine to ten months old.
But the key word here is reliable. Let's take a look at a few sales examples of properties that sold within a few weeks of when they were assessed.
Comparison of Assessment Amounts vs Actual Sale Prices
303 at 111, East First Avenue
Assessment as of July 1st/22 - $601,000
Sale price on July 8th/22 - $645,000
Sold for $44,000 above assessment.
Had the seller relied on the assessment as market value, they would have lost out on $44,000.
Had the buyer relied on it as market value, they would have thought that the property was overpriced, would have passed on it, and lost out on an opportunity.
224 Woodstock Avenue
Assessment as of July 1st/22 - $1,664,000
Sale price on July 21st/22 - $1,482,000
Sold for $182,000 below assessment.
Had the buyer relied on the assessment as market value, they would have overpaid for the property by
Had the seller relied on the assessment as market value, they would have thought that they were under selling. They would have passed on the offer, not have sold and missed out on the opportunity to move forward.
6823 Killarney Street
Assessment as of July 1st/22 - $2,616,000
Sale price on July 23rd /22 - $2,735,000
Sold for $119,000 above assessment.
454 at 250 East 6th Avenue
Assessment as of July 1st/22 - $676,000
Sale price on July 13th/22 - $640,000
Selling for $36,000 below assessment.
As you can see, there was quite a difference between the assessed values and the sale prices of some of these properties.
Not all properties will follow the same pattern though, and there may be some properties that will sell for close to assessment.
The point of sharing these sales was to show you the costs and consequences that buyers and sellers may undertake if they rely solely on assessment values as market values.
Please note I am not trying to disparage BC assessment agents. They are working extremely hard within the limitations that they have, and their goal is not to provide buyers and sellers with market values for the purposes of buying and selling.
My advice to those of you who are considering buying or selling is to not make plans based on assessed values.
Be Market Wise. Monitor What Matters so that you can Make Informed Decisions.
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