Real Estate Appraisal and Property Assessment
British Columbia’s Assessment Act requires that every property owner receive a property assessment notice reflecting market values effective July 1 of the preceding year. This means that sales of comparable properties up to June 30th from the prior year are used to determine Property Assessments. Market value is the price an unencumbered property would sell for if a reasonable amount of time is allowed to find a purchaser.
When a property is first assessed, BC Assessment receives information on what the Land portion sold for, and then the building permit to construct the home. In subsequent years the Property Assessment is adjusted by comparable sales. Ongoing when establishing the market value for a particular property, BC Assessment considers each property's unique characteristics. These are the same characteristics that a home purchaser would consider, including size, layout, shape, age, finish, quality, number of carports, garages, sundecks and condition of buildings. Services in the area, location, views and neighbourhood may also influence a property's market value.
Appraisers may enter a home to conduct property inspections, ensuring that the description and condition of a property is accurately reflected on the Property Assessment Notice. BC Assessment appraisers analyze all real estate sales in their area and develop common units of comparison and corresponding values. They review similarities and differences between properties to arrive at a uniform assessed value for a particular property.
Frequently Asked Questions about Property Assessment
Why is the assessment notice mailed six months after the July 1 market value date?
BC Assessment’s professional appraisers must review close to two million properties every year and this six month period provides staff with the time they require to ensure the annual assessment roll is as fair and accurate as possible. Appraisers must analyze real estate transactions which can occur before and after the July 1 valuation date.
What is the relationship between property assessment and taxes?
Provincial and municipal governments (taxing authorities) pay for public services through property taxes, which are based on assessed value. BC Assessment determines the market value of properties and sends property owners a Property Assessment Notice. Then, tax authorities determine the property tax rate they will set to raise the revenue needed to pay for public services. The tax authorities apply this rate to the assessed value of properties and send property owners a Tax Notice. While homeowners find it confusing and sometimes believe that their Property Assessment changing up or down will directly affect the amount of their Property Tax, this is incorrect, unless their specific Property Assessment changes are greater than the average for their municipality.
The greater likelihood for a higher Property Tax bill is the planned increase in the municipal budget.
Why are assessments based on market value?
Market value assessment is widely considered to be the fairest system for distributing the property tax burden.
In any tax area, properties of equal value contribute the same tax, while higher-value properties contribute more than those with lower values. Both assessors and taxpayers can readily check assessments by comparing recent sales and assessments of similar properties in the neighbourhood.
Why is there a difference between my property’s value on the Assessment Notice, the bank mortgage appraisal or a real estate assessment?
The real estate market is the single biggest influence on market values. Market forces vary from year to year and from property to property. The market value on an assessment notice may differ from that shown on a bank mortgage appraisal or a real estate appraisal because BC Assessment’s appraisal reflects the value as of July 1 of the previous year, while a private appraisal can be done at any time.
The other main reason for a difference in value between BC Assessment and a Real Estate assessment can be attributed to property condition compared to the average for the category. For example, if you had two 30 year old homes, both the same size, design and on the same street, they should be the same value. But what if one home has never had any updating, painting or renovating while the other has recently renovated kitchen and bathrooms? BC Assessments only has knowledge of renovations that require permits, while many renovations have historically not require permits if they are cosmetic in nature and do not change any of the main components.
So while BC Assessments are a guide to what you property might be worth there are many variables affecting the current value. Because BC Assessments rely on data from the previous year, their information also lags the current market. This means that in an increasing market the BC Assessment might be below current market value, and conversely in a falling market the BC Assessment might be higher than the current market.
Do taxes increase as a result of inspections?
Not necessarily. A property inspection may reveal previously unrecorded improvements or evidence of physical deterioration. This could lead to a change in the value of the property assessment. Property taxes increase for three reasons:
- the tax authority raises the property tax rate to raise more revenue;
- Improvements increase the property’s value; or
- Improvements raise the value of a property in relation to most other properties in the jurisdiction.
Changes in classification or exemption status can also affect the value of property and subsequent taxes. For more information on tax relief and deferments, contact your local municipal office.
Source: information summarized from BC Assessments website.