Tax Assessments are out and they’re not (really) accurate.
Before we dig in, let me point out that this blog has just reached four years of age and is going strong. I had over 32,000 unique visitors to this blog in 2011. My posts have been sparse of late as I was in Tokyo having fun (and doing some business too) over the holidays, but that will be the source of an upcoming post about how lucky we are to live here and have the lifestyle we have.
So… tax assessments. Homeowners around Nanaimo have just gotten their property assessments last week. This government issue document is mainly about what they think your home is worth and from this number (combined with a slew of other factors mainly about which services are available) they calculate how much property tax will be owed on that property this year.
In my line of work, the assessed value of a property is fairly frequently brought up by Sellers and Buyers alike to justify what they think a given property is worth. It is understandable that the layman would rely on such numbers for their conclusions, but when scrutinized from the perspective of actual market value these numbers do not hold up. But don’t worry, they are typically on the low side… but not always.
In May of 2009, I wrote this post but as it is something that continues to come up, I will write about it once again. I will borrow from the post but I will use the latest available information to show that my position is not just something I’m pulling out of a hat.
Before attacking the accuracy of assessed value I want to point out that I think it is understandable why the taxing system works the way it does. I am not trying to blame anyone, I just want to clear up this all too common misconception as it affects people’s decisions regarding real estate. Real estate is, of course, the most valuable thing most of us ever own so it’s pretty important to have a clear understanding of it.
Quite often people will tell me the assessed value (for taxes) of their property, or they will ask about the assessed value of a property on the market that they have some interest in. My answer is that although the prices are generally in the right ballpark, that they are not usually very accurate and in many cases way off the mark. Not everyone takes me for my word, and thanks to my university years I am in the habit of being able to back up what I claim. So when someone challenged me on it one day I pulled up a large sample of recently sold properties and compared the sale prices to the assessed values and created an average by use of a computer program Realtors have access to.
I just did this again for the purpose of this post. Read on if you are skeptical, curious or the sort who likes stats and numbers.
According to the program us Realtors use known as “Interface”, there were 126 properties that sold in the Nanaimo area between January 1st 2011 and Janurary 31st 2011. (I chose these numbers from a year ago as the new assessment values have not been entered into our database as of yet. These numbers do however show the same pattern as when I did the same thing in May of 2009 and I see no reason why this pattern will change any time soon.) There were 3 properties that didn’t have assessed values attached to them so they were removed from the list. I averaged the numbers on all of these listings and here is the pertinent info I found:
Average List Price: $328,356
Average Sale Price: $319,168
Average Assessed Value: $308,805
Of course, we know that the people making these assessments have not been inside the properties so they are only guessing what the places are like inside. As I understand it, hey have a budget that needs to be payed for and they have to find ways to justify the way they collect it. Now before you start complaining, think of how much more it would cost to run the system if they went to each home and made sure it was totally accurate. I don’t know about you, but I’m glad they don’t because I would find it invasive. Again, I’m not saying the system needs to change, I just think people should know what these assessments are not for which is pricing a property that’s to be sold.
I might be labouring the point, but here are some of the more notable differences I found in that list of recently sold properties. You’ll notice that they tend to under value the properties rather than overvalue but the opposite is sometimes true as well.
Sold Price Assessed Value
So, if you want a better idea of what your home is worth just contact me. It will cost you nothing but a conversation with me at your place. This is a big part of what I do for a living.