PCAG Blog

A question we're frequently asked is "what is the market value of my home relative to my assessment?". The answer to the question is always "it depends".

The BC Assessment Authority (BCAA) primarily uses mass appraisal techniques to determine the market value of residential properties in BC. Mass Appraisal is the use of very sophisticated computer modeling to determine the market value of properties for tax purposes.

One check that the BCAA will use to gauge the accuracy of their models is by the comparison of actual sale transactions in the market with their systems' estimate of market value. It is this ratio that helps to tell them if they are on the right track. Using the assessed value to determine the current market value of an individual property for selling or buying purposes can have problems. Lets look further.

If there are two properties that have recently sold for $200,000. The first property has an assessed value of $185,000 and the second has an assessed value of $215,000. Taken together, the two assessments average $200,000 and the average of the sale prices is also $200,000, obviously the model is very close to the average actual sale price and is well within limits acceptable for assessed values. The model would be considered fairly accurate for tax purposes but when each property is considered individually their actual sale price is different from the assessed value by $15,000.

This is an oversimplification, of course, but it illustrates a fundamental problem with putting too much weight on your assessment for the value of a single property.

There are other problems that arise as well. Upgrades to a property that didn't require a building permit may not be reflected in the assessment. The reverse can true if the property is in very poor condition.

Also, the effective date of appraisal for assessed values and tax purposes is as of July 1 the previous year. So assessed values are always behind the market. If the market is changing rapidly there can be a significant difference.

In our experience we have noticed that the more unusual the property the more variation there can be in the sale price to assessment ratio.

Having said the above, here at PCAG we have done some of our own analysis in the current market. Take a look...

The above graph shows the relationship of assessed values to sale prices since July of 2008 and the trend over the past nine months. Last summer, sale prices were above assessed values by about 10%. Currently, sale prices are about 10% below assessed values.

Whether buying, selling or lending, now more than ever, it's critical to know current market value. An independent and professionally prepared real estate appraisal is the best way to gain that insight.