Monday, October 10, 2005
What it's really worth: a look at the British Columbia Assessment Evaluation Process.
Every year in January property owners throughout British Columbia receive their property Assessment Notices. Yet, every year in January the evaluation estimates brought forth by BC Assessment (BCA) differ considerably from market values determined by Realtors. In some cases the difference is over thirty percent less. What accounts for this discrepancy?
BCA is a provincial Crown corporation that determines the market value of all real properties in British Columbia. After determining the correct classification, actual value and exemption status of every property, BCA provides taxing authorities with an Assessment Roll, which lists all properties, names of the owners and the taxable values of the land and any improvements (buildings). The assessment and taxation of real estate in British Columbia has existed since before 1860. BCA was established in 1974 to replace municipal and provincial government assessment offices. The independent, publicly funded corporation was created under the Assessment Authority Act to produce and maintain uniform property assessments across the province. BCA evaluates most properties in B.C. based on market value, which is considered the fairest way to assess property.
This market value is determined by following generally accepted appraisal principles. Each year the assessor takes into account location, size, topography, shape, replacement cost, age, condition, rental income and sales of comparable properties in the area, as well as any other factors that might affect the value of the subject property, to determine what the property would sell for. The market value of the property is then recorded on the annual Assessment Roll.
There are two main reasons for the discrepancy between market value as determined by the assessor and market value determined by a Realtor:
- BCA sends property Assessment Notices each January based on BCA's estimate of market value of the property as of the previous July 1st . On the other hand, the value a Realtor places on the property is current as of today's date, thus resulting in a more up-to-date estimate.
- BCA maintains a database of 1.6 million properties. When a new property is created through zoning, re-zoning or construction, or the classification of an existing property changes (as in the case of industrial warehouses turned into residential lofts), a BCA appraiser visits the site and takes into account lot or strata lot size, structure, cost of construction, replacement value, selling data and other factors. To update values, BCA appraisers do not visit properties annually. Instead, they use a mass appraisal system. Values are calculated by evaluating prices for homes sold in each neighborhood around July 1st and then by applying the data to get an average price. BCA, furthermore, uses a broad range of variables that add up to sixteen screens of data for each property.
A Realtor, conversely, scrutinizes the most recent comparable data for homes sold in a neighborhood, or apartments sold in a certain complex. Realtors also examine the exterior and interior of properties in detail, noting alterations and major renovations such as a new kitchen or bathroom that affect the value of a home. They also take into account view lines and architectural styles. In the eventuality that every home and every lot on the street are essentially the same, both BCA's and Realtors' evaluations will be similar. Differences will be more likely to occur in neighborhoods where every lot on every street is different, every home's architecture is unique and every view is distinct.
Luigi Frascati
Real Estate Chronicle
