January 3, 2013
Assessed Values in the News
Everyone would like a shortcut to determining market value in our marketplace. Out of fashion for the past several years, assessed values are once again being used as a metric to determine market value by many members of the public. I'm constantly being asked for the assessed value of a property. People want to know what the average percentage over or below assessed value represents market value. I am asked why properties are priced over assessed value, don't sellers know its a very competitive market. And so on.
Stop it. Think about it. Assessed values are generated by BC assessments. The key word here is generated. In essence they have an algorithm that is applied to a particular postal code or sub area, that is fed reported sale data, that is adjusted by "assessors" in an effort to compensate skewed data and then the assessed values are spit out. They have no firsthand knowledge of any particular property. They do not take into account up to the minute market data, as they do not have access to it. They generate a number for one purpose only, and that is to determine property taxes.
In the past 10 years the assessed values on properties were grossly, and I mean grossly, under the market values of properties. A couple of years ago it seems some genius decided the best way to try to correct that is to throw huge increases into the assessments, at exactly the moment our market peaked, at seemingly random intervals, and see where they end up. And now they are trying to compensate by again lowering assessments across the board. Now instead of assessments being generally far too low, they are all over the map. Why suddenly it is in vogue to seek out the assessment numbers as some way to determine market value is a mystery to me.
Here's what isn't a mystery to me. To determine market value you look at comparable sales in a reasonably tight time frame to what you're selling, you look at active listings to determine where in the marketplace the property will fit and you make adjustments for the specific features and amenities of that particular property. Then you can determine market value. Notice how assessed value isn't included in there? That's because if assessed value does turn out to be accurate, it is merely a coincidence - it's the universe proving again that even a blind squirrel will find a nut once in a while.
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