The difference between tax assessment value and Fair market value when buying a home

By Doherty • May 29th, 2011
Noe Valley, San Francisco, California, USA.

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In the past 30 days, three different prospective buyers have indicated to me that they do not plan to pay a lot more than the tax value given to the property. Why is this? Let me attempt to answer this question as best as a Vancouver real estate agent could: People evidently surmise that the number that is assessed for tax reasons is the same as what the house is actually worth.

Since this recession, real estate agents have started to include phrases like “price is below the assessed value” in their listings. We at REMAX Vancouver have not fallen to that schema althought I have seen a few… As a result of these statements, houses that are priced lower than the assessed value are seen as bargains. Unluckily, this may not always be correct.

The assessed value of a home is an amount that is determined by a tax official (British Columbia employs a provincial crown company known as Vancouver BC real estate Assessment) in order to calculate taxes. After this assessment is figured out, the entity responsible for taxation, like the City of Vancouver, then sets its tax rates according to the assessment.

Fair market value figures the price that an intelligent, free-thinking, and interested person would consider paying to the person who owns the property, who is not required to sell the house if he or she does not want to. Preceding putting a house up for sale, a real estate representative will locate several houses that are similar to that of the seller that have sold in the past few months. Based on these comparisons, the representative can then advise the owner on what the price of the house has to be. When a buyer and seller come to a purchase price, this determines the fair market value of the house. This illustrates the reasons why you need to compare similar houses’ selling prices before letting slip to the owner what you’ll pay. This can ensure you know that the house is priced fairly.

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