Understanding the difference between property assessment and market value is crucial for homeowners and potential buyers, especially in British Columbia’s dynamic real estate market.
Whether you’re planning to sell your home, buy a new property, or simply evaluate the worth of your current home, knowing how these two concepts differ can save you tons of time and frustration of trying to figure this out alone.
By the end of this guide, you’ll have the clarity you need to make well-informed real estate decisions.
Table of Contents
What is an Assessed Value?
In short, the assessed value in British Columbia is the value calculated for a property by BC Assessment, which is typically used to calculate property taxes.
This value is based on a combination of factors such as market value, location, property size, and improvements or renovations. If you’re located in another province, this is typically handled by your local municipality or tax office.
The important part to understand here is that it can (and usually does) differ from the market value of a property. As the assessed value is primarily used for taxation purposes rather than determining the selling or listing price.
What is BC Assessment?
BC Assessment is a provincial Crown corporation responsible for determining the assessed value of properties across BC. The organization’s goal is to provide accurate property assessments to support the equitable distribution of property taxes. Every year, homeowners receive a Property Assessment Notice that outlines the assessed value of their home.
This assessed value is based on the property’s characteristics and how it compares to other similar properties in your area. These inputs may include property size, location, and known improvements, such as a new building or major additions.
Check out BC Assessed Values Here.
BC Assessment’s Impact
The assessed value directly correlates with your property taxes. Municipal governments in Metro Vancouver and across BC use your home’s assessed value to calculate your annual property tax bill. While BC Assessment strives for accuracy, it’s important to understand that this figure does not always reflect your home’s current market value.
For example, in a fluctuating market like Vancouver, where property prices can rise or fall rapidly within a year, the assessed value (calculated based on data from the previous July) may no longer align with what your property would sell for today.
Recommended Reading: The Guide to Costs of Selling Your Home in BC
How is Market Value Determined?
On the other hand, the market value of a property is how much someone is willing to pay for it if it was listed on the MLS or open market.
Unlike the assessed value that BC Assessment calculates, the market value is all about how potential buyers will perceive what your property is worth today.
The market value is influenced by current demand, interest rates, comparable sales, and unique property features. Realtors often use tools like Comparative Market Analyses (CMAs) to determine a property’s market value.
The value of a home may also be appraised by your lender or other professionals involved in the real estate transaction. For example, an appraiser from the bank may want to conduct their own market value appraisal to ensure that they’re mortgage interests aren’t over exposed and you’re paying an accurate price for the risk they want to take on.
How is Market Value Different from BC Assessment?
The key distinction between BC Assessment and market value lies in their timing, calculation methods, and purpose.
Timing
BC Assessment is based on data collected mid-year (usually July). While market values are calculated and determined at the time you’re ready to sell.
Purpose
The purpose of BC Assessment is designed for property taxation. Whereas market value serves as a guide for a real estate transaction.
Calculation
BC Assessment uses a mass appraisal system, lumping together similar properties for analysis. Market value, however, involves a more detailed and personalized evaluation.
Example
For example, let’s say you did renovations and upgraded all appliances, took out carpet and replaced it with beautiful heated tile floors.
These upgrades and additions would typically not be accounted for in BC Assessment property value determination. However, these would be desirable upgrades that a new buyer may pay a premium for and would be included in the market value that a trusted Realtor would provide.
Factors that Influence Market Value and Home Prices
There are tons of factors that can influence the market value of a property that can make it higher or lower than the BC Assessed value. These include factors like:
Understanding what influences your home’s market value can help you make strategic decisions leading up to selling. Here are some key factors to consider in BC’s real estate market, including Metro Vancouver:
Location
Proximity to schools, transit hubs like Skytain stations, and other amenities like malls and shopping districts can add value to a property, too.
Property Upgrades or Maintenance
Upgrading outdoor living spaces, energy-efficient windows and appliances, or a completely renovated condo can boost your property’s market value. Similarly, well-maintained properties often command higher prices.
Market Conditions
Overall market conditions and national or provincial economic factors can also play a role in the market value of a home. For example, the increase in interest rates starting in 2021 played a role in how properties are priced.
Similarly, supply and demand are also major factors. Low inventory combined with high demand typically drives market values upward.
Putting it All Together
While this seems simple, there is tons of data that goes into determining what a market price for a home should be. And your Realtor will be able to help you understand each factor in greater detail, with how it relates to your specific property.
Recommended Reading: Ready to Sell? Understanding List Price & Comparative Market Analysis
Other Commonly Asked Questions
Are BC Assessments Accurate?
While BC Assessment works hard to assign fair values. However, do keep in mind that it’s only an estimate and doesn’t always reflect a home’s market value. There are cases where you may think BC Assessment made a mistake, whether their estimate is too high or too low for what you expected, you can appeal through the Property Assessment Review Panel (PARP).
Here is the full guide on a PARP complaint provided by BC Assessment.
How much does a home appraisal cost in BC?
A professional appraisal in Metro Vancouver usually costs between $300 and $700, depending on property size and complexity. For example, if you have a large 3000 sq ft detached home, the appraisal is going to cost more than if the property is a 1-bedroom condo in a well-known Vancouver tower.
Typically, you don’t need an appraiser if you’re selling. However, if you’re buying, your lender may require that the property is appraised by a professional. And typically as a buyer, you’ll need to foot the bill for that cost.
Luckily, if you’re buying a condo in a popular area that has been established for a while, your lender may already have assessed similar units and may be satisfied with a virtual assessment from their current data.
How often does BC Assessment assess properties?
BC Assessment re-evaluates properties every year, with notices sent out in January. This helps ensure fairness for homeowners and accurate tax distribution. The assessed value is always based on the previous July’s market conditions.
What if the Assessed Value is Higher than the Market Value?
If the assessed value and market values don’t align, don’t worry! As we reviewed earlier, there are several factors that can create differences in the assessed value versus the market value.
The timing of the assessment versus the timing of when you sell and the current market conditions will always be a factor. There could also be changes to the property or building unaccounted for by BC Assessment. And so on.
If there are differences, it’s always ok to ask your Realtor what they think and what is their professional opinion on the matter.
Recommended Reading: Understanding Property Transfer Tax (PTT) in British Columbia
Making Sense of Property Assessment and Market Values
Understanding the difference between BC Assessment and market value isn’t that complicated once you dive into the details and nuances of each. Whether you’re buying, selling, understanding this is important to having a smooth transaction.
If you’re selling or buying and still have questions about assessed versus market value, contact us today for a no-obligation chat about your real estate needs.
