Each year, the city reassesses an approximate value of our homes in order to calculate a new property tax amount. A common question I often receive is whether that value is truly representative of the potential sale price of the home assessed. The short answer is “not really”. Obviously that leaves room for interpretation so here are 4 points to note:
- The assessors are evaluating literally every property in the city, therefore they are not physically viewing each home. Important variables such as upgrades and condition aren’t taken into account. In certain areas, 2 identical homes on the outside, one original and the other with a full renovation can be assessed with the same value. If both homes were put on the market, the renovated home could sell higher than the original home in some cases, by multiples of 6 figures. Even if you’re pulling all permits for your upgrades, there’s no way to properly adjust the value without a professional to physically view and assess the market value of the work completed.
- The market changes month over month. The assessments are made over the year prior. As we know, a lot can happen over a 12 month period. A home has its highest value the day it enters the market. As each day passes, its value slowly dissipates. The longer it sits, the lower the market will pay. Therefore what your home was worth today, can change within weeks. Any price determined by any person cannot be deemed reliable unless it’s in real time.
- It takes a high level of understanding the price variables of direct location. A property backing onto trees compared to the one across the street can fetch a substantially higher sale price. To further complicate things, that margin can vary more in some communities than others. Certain market conditions can also affect these variables. For example, when supply is low, the price margin between a home located on a busy road and a home on a quiet street will tighten up. Buyers tend to ignore certain factors when their options are limited. They may already be frustrated at the lack of options and in that time, those details are not important to them. However when supply is high and buyers have several options, they can afford to more selective. Sellers then need to be more aggressive to attract a buyer. Consequently, the price margin between 2 direct locations then spread farther apart. City assessors certainly understand this, however it is next to impossible to properly account for these variables in every area, with the multiple of every market condition.
- I have provided many evaluations and have been 30,000 below or above the value. When doing my market evaluation I usually state the city assessment just to show how far out this assessment can be , especially in a declining or rising market. Values are decided upon only by the sales of similar homes in the same area that have sold. This is where an experience Realtor comes in.
There are certainly times when the assessed value can be right. Assessors do a fantastic job with the information they are provided, at the time they are investigating. As for the city of Edmonton, I’ve personally noticed improvement year over year this past decade. When they factor an average price per square foot on the dwelling (which is certainly your strongest base for assessment), the law of averages can certainly prevail. If you happen to check in at the perfect time, it is possible that your house value can be spot on, but don’t rely on it.