BC Assessment Authority calculations. How do they value my house?

There is much confusion surrounding BC Assessment Property Tax notices and how they are calculated. Every year at this time we hear stories from our homeowners who are puzzled as to how their value was established.

Why are there differences between the BC Taxable value and the value of what the property might actually sell for?

There are two factors that can cause distortion:

1-     Inaccurate information about the property. What changes have been made this property?

2-     Timing of Comparable Sales

Inaccurate Information

Property tax value for any property originally starts when the property is “new”.  Here is a simple example of how that works.

If a building lot is sold, and then a new house built, the BC Assessment authority receives both the lot sale information as well as the value of the building permit taken to build the new house. Those two pieces of information are combined to start the process. Over the years the Assessment for that same lot and house are adjusted annually by neighbourhood sales, and any subsequent permits for renovations etc.

The degree of accuracy for a property value can erode as a home ages.  This is because the Assessment office does not receive updated condition information about properties. Various owners perform varying degrees of maintenance and renovations, resulting in once similar homes becoming different values over time.

As an example, there could be two nearly identical homes built on the same street during the same year. They might have even sold for the same price when new. 30 years later one of those homes might still be in good condition, although with original features having never received significant renovations over the years. The second similar home might have received an $80,000 cosmetic renovation. Although a significant renovation could have a building permit taken out from the municipality, this is not always the case. Not all renovations require a permit. Cosmetic upgrades do not require permits.

Usually renovations where changes are planned to structural and/or electrical as well as plumbing changes do require a permit. If a permit is taken, the BC Assessment Authority receives this information. If no permit is taken then obviously they do not.

The Taxable Assessment Authority assumes that the home stays in average condition for its age unless it receives information otherwise.

Timing of Comparable Sales

The secondary variable is the timing of the comparable sale information used by the BC Assessment Authority. They typically use comparable sales up to July of one year to produce an assessment value for January of the next year. During times of rapidly changing prices, these values can either be high or low compared to the following January.

If the market is rising quickly as it did during the period of 2001 to 2007, then the Assessment is often low compared to what the home would actually sell for. During this past year, 2011, prices have been slipping, and it is not uncommon to see homes selling under their taxable assessment.

If you would like assistance in determining how accurate your taxable assessment is, please call us and we would be glad to help explain further.