Why You Shouldn’t Rely On City Property Assessments For Buying or Selling Real Estate

The City of Calgary Property Tax Assessment should not be used for determining a home’s market value.

We’ve covered this topic before but I would like to revisit it with some more information that you may find helpful.   Let’s begin with an email:

A friend of mine is looking at the property to buy and it’s assessed by city at $590k or $595k and the seller has been in market to sell it for quite some time but long story short he’s asking $550k for it. Now given that usually seller’s do show flexibility of few grand he is targeting to get it at his desired level.

Do you believe it is a good deal given that it is less than city assessment or when we bargain should we do it more low ball than this?  We are pretty new in the market hence all these guidance seeking questions.

Argh.  I realize some people don’t want to use a buyer’s agent thinking they’ll save money, but there were  just so many misconceptions in this email that I fear they’ll get the short end of the stick.  (I edited out some more information that was property specific)

The seller’s asking price could be ridiculously high and still be below the city assessed value.   This buyer could end up overpaying by thousands of dollars and at the same time be thinking they “lowballed” the seller.

Let’s dig a little deeper into why the assessed value should not be used for setting today’s market price.

City Assessment Doesn’t Match Sold Price

According to the City of Calgary, the “Property Assessment Notice reflects the estimated market value of your property based on the valuation date of July 1, 2012.”   But does it really?   Let’s look at homes that sold on exactly July 1, 2012 and compare the sold price with the assessed value.

July 1, 2012 was a Sunday with 28 total sales.  Again, these are homes that sold exactly on the valuation date so they should be the most accurate assessments.

Assessment Comparison

None of the assessed values match the sold price and the price difference ranges from $60,500 above to $85,100 below the assessed value.

City Assessment Is Outdated By Up To 1.5 Years

Since the City of Calgary’s assessment is based on a July 1, 2012 “market” price, today that value is over a year outdated and doesn’t take into account any price gains/losses during that period.

For single family homes in general, it means that assuming the assessed value was correct to begin with (which we’ve already concluded it’s not), the home is under-priced by about 5-8% depending if you’re following the median, benchmark or average price.

On a $500,000 home a seller could be forfeiting $25,000-$40,000 right off the bat by using the City assessed value.

City Assessments Are Done Sight Unseen

None of the homes are individually visited by the City.   It is a mass appraisal.   The City doesn’t take into account any renovations, upgrades or any damage and maintenance issues.

Would you buy a home sight unseen? Not normally. So why would you base your decision on a mass assessment, sight unseen?

Homeowners Want Lower Taxes

City Property taxes are determined by Mill rate X Assessed value. Does anyone complain when their assessment is too low resulting in lower taxes?  (Aside from this one funny example)

Market value based on recently sold comparables and bank appraisals are the two values that really matter.   The City assessment is not a true indicator of a home’s market value.

One response to “Why You Shouldn’t Rely On City Property Assessments For Buying or Selling Real Estate

  1. Pingback: Best Performing Calgary Communities (July 2013) | Calgary Real Estate Review

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