Kamloops Real Estate: Assessed Value, Appraised Value & Market Value?

Posted by Steve Harmer on Monday, October 26th, 2015 at 11:46am.

Whats the difference between Assessed, Appraised and Market values???

Value of your homeUsually, market value is determined by what a buyer is willing to pay for a home, and what the seller is willing to accept. The recent agreed upon sale price of a home is usually the best determinant of a property's market value. However, there are circumstances where the price paid for a home is not the true market value. For example, there may be a special relationship between the parties which resulted in a much lower value being paid. Also, a buyer may have been willing to pay a premium for a property for some reason, and so it sold for much more than it would otherwise be worth.

There are several things to consider when determining the pricing of your home for sale. The most common benchmark people use is the Assessed Value. This is the value used by local governments to determine your property taxes. However, this is not a reliable standard of measurement for pricing your property for sale. A quick survey of recent sales and their relation to assessed values will tell you that. However, in past years, I have found it useful to know 'the general relationship' between market value and assessed value. For example, when I would do a Current Market Analysis (CMA) for a client I noticed that, on average, prices tended to fall between 110% and 120% of assessed value. However, since mid-2008 there hasn't been any such 'average'. Instead, I'm seeing some properties priced significantly below assessed value, some just below, some at assessed value, some just over assessed value, and some way above assessed value. There seems to be no clear relationship between sale price and assessed value these days. It's all over the map.

One way to determine the list price of your home is to get a realtor to do a Current Market Analysis (CMA) for you. Realtor's don't charge for this service. Current Market Analyses will usually include a range of comparable properties to yours, usually within your neighbourhood. However, if you have a particularly unique property, they may need to search a broader area to find those comparable properties. Also, if there has been little activity in your area, they may need to go further back in time than just the past few weeks or months.  Some realtor's will do a CMA in a written report format, while others will simply pull a selection of comparable properties together and go through them with you.

Whats my home worth in Kamloops?A Current Market Analysis should include properties currently on the market (your competition if you list), pending sales (the best determinants of what the market is actually paying), recent sales, and expired or withdrawn listings.  The more comprehensive Current Market Analyses done by realtors don't differ too much, in form, from the work done by a professional appraiser.

A professional appraiser spends all their time appraising properties, they are paid for the work they do, and their reports are often seen (by buyers) as less biased. A real estate agent will do 'an estimate'. An appraiser will do a professional appraisal. Imagine your reaction, as a buyer, to the following statements...

1. The seller says their house is worth $500,000.

2. The sellers' realtor did a CMA and he/she estimates it's worth $500,000.

3. This house is priced at $500,000 based on a professional appraisal.

Most buyers would consider #3 as informative, however most sellers would also rather pay nothing for something. In practice, real estate agents are usually used for pricing estimates, except in special circumstances. Most buyers, also, don't care much about what anybody else thinks the house is worth. They care what they think it is worth. And if that carpet has to go, and that wallpaper needs to go, and they can't believe the kitchen, it doesn't matter what the professional appraisal says.  This is why we say that market value is ultimately determined by what a buyer is willing to pay for the home, in a range acceptable to the seller.

Property AppraisalIt is important to note that there are two kinds of professional appraisals. There is the marketing appraisal, such as the one mentioned above. And there is the financing appraisal, which is done so the bank is satisfied the house is 'roughly worth' what the buyer and seller have agreed it's worth. This means that when the appraiser goes in to evaluate a house for a financing appraisal, they are more looking to justify the recent sale price (which we've already said is the best picture of market value) than see if it is much different.  In my personal experience, I have rarely seen a financing appraisal value differ significantly from the sale price! As such, I don't think one should be surprised if, when buying a home, you find your financing appraisal comes within $2,000 of the sale price. It is not a good standard of measurement for whether or not you 'got a great deal'.

Finally, please seek legal advice if you are ever approached by somebody wanting to purchase your home in a private sale. I am aware of two instances in Victoria, BC, where seniors sold properties well below market value in private sales. You deserve to get as much as you possibly can for your home, based on the current market conditions.

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