It you’re new to the world of buying and selling real estate the whole concept of making the biggest investment of your life, as well as the industry specific terminology, can be daunting. One of the items that often cause confusion for first (or even second or third) time buyers is that of Market Value versus Assessed Value. While obviously closely linked, there are a number of differences between the two terms, differences that will affect how much your home will sell for (or cost if you are a buyer). In this entry we’ll attempt to clear up the confusion by differentiating the two terms.
Assessed Value: The assessed value of your home is the number provided each year by BC Assessment, and is a dollar value designed to help municipalities determine the annual property taxes of a home. When determining this value the provincial authority examines a number of factors, including but not limited to: size of the lot, age of the property, construction materials used, its physical location (neighborhood) and others. Once the ‘assessed value’ of the home has been determined, property taxes are charged back to the current property owner based on a percentage rate. The assessed value of a home is essentially its tax value.
Market Value: In contrast to assessed value, a market value is much more subjective and is based on a different set of criteria. A market value of a home is not its taxable value, but what it would sell for once placed on the market. A market value can be based on the current averages a person would expect to pay for a home of that type, in that specific area.
In general terms the assessed value of a home will be less than the market value of the property. If you are a homeowner and the assessment for your property is lower than it was last year, that’s not necessarily a bad thing. It will in all likelihood mean you will be paying a smaller tax bill this year. Likewise a jump in assessed value will probably mean your municipal tax bill will go up. But a markedly lower assessed value will ultimately affect what the home will fetch on the market. So there is a real trade off.
Determining Market Value: In its simplest terms the market value of a home will be determined by the health of the local real estate marketplace. The actual price of the home once placed on the market will be determined by the REALTOR® charged with selling the property. Using the Multiple Listing Service® (MLS®), and its extensive market analysis tools to compare your property with similar properties that have recently sold in the area, the REALTOR® will provided a reasoned estimate of what the home will sell for.
In neighborhoods where properties and houses are similar in character, the estimated values will probably be similar as well. In contrast unique properties; extra large homes, those using a different building technique (like a log home) or a vintage character home will present a special challenge for the REALTOR® as there will not be a wealth of data available for similar homes. In a case like this the experience of the salesperson and their ability to gauge the opinions of other REALTORS® through special REALTOR® showings of the property will help set a realistic market value.
While an assessed value is determined by the government and is fixed, a market value can fluctuate so home sellers may find that the selling price of a property has to change through the life of the selling process for the sale to complete. The job of the REALTOR® is to get the best value for the client possible, and they will work diligently toward that end throughout the process. If you would like to know the market value of your home, contact your Realty Executives sales associate to arrange for a no-obligation Comparable Market Analysis (CMA). Knowing beforehand what the home will likely sell for will help you plan for the sale and reduce the likelihood of surprises once the sale completes. First step of course, is to contact your REALTOR® to begin the process.