Posted at 12:00 p.m.
How to explain the difference between different assessments made for a property?
Despite the good will of the experts, the evaluation of a property is not an exact science, as noted by Daniel Fournier. “What may appear beautiful for one is not necessarily so for another,” explains appraiser Richard Lefebvre. It’s all subjective. I once saw a $100,000 discrepancy with a co-worker” over the valuation of the same property.
The challenge is even greater these days due to the small number of real estate transactions. “When there are few sales, there are fewer comparables. A few years ago, you could compare a property with three others on the same street, but this is far from the case today. We do with what we have. »
In such a context, the experience of the evaluators is essential.
You have to have appraised a lot of properties to fully understand the value. That said, as in any profession, there are good and less good experts.
Richard Lefebvre, appraiser
It should also be noted that buyers do not have the same perception of what a seller considers to be an asset. For example: a property with a basement. While some buyers are willing to pay for a nice finished basement, older people who may use it less in a few years won’t want to pay for it. For its part, a couple with several children, who need several rooms, may have to redivide it and reinvest. “It is not true that in market value, an owner will recover the $100,000 invested to dig and finish a basement”, illustrates Mr. Lefebvre.
Can an owner avoid the problem of discrepancies between external appraisals by doing the work themselves? Yes and no, because he does not have access to “comparable” properties sold. Only to other properties for sale. “Information on sold properties is reserved for professionals in the field who must pay to consult it. Since the price displayed is not the price paid, the self-assessment task is all the more risky.
Why is there so much difference between the asking price and the municipal assessment?
Louis Ménard wonders why the municipal assessment does not always reflect the increase in the value of a property on the market. We put his question to the City of Montreal. Here is what she answered us.
The municipal assessment reflects the most probable sale price on a date fixed in time. A municipality uses it to calculate property tax for three years. School service centers use it to set the school tax.
For the period 2020-2021-2022, the value entered represents the value of the building on 1er July 2018. This is the market reference date. In a rising market, this 2018 value is already 18 months behind the start of its application, the 1er January 2020. If prices continue to rise, the gap inevitably increases over time. But not forever, because the values are updated when the next three-year roll is filed. Thus, the securities entered on the 2023-2024-2025 roll will have as market reference date the 1er July 2021. They will therefore also lag behind the values that will be observed on the market in 2023, 2024 and 2025.
Another element to consider: this is a mass evaluation process. Appraisers must indicate a value for all properties in a given municipality, ie more than 500,000 at the scale of the Montreal agglomeration. It is therefore impossible to pay particular attention to each of the properties.
Instead, general value trends are applied to buildings.
The value of a building varies in particular according to its physical characteristics. However, certain improvements carried out on buildings or certain conditions of accelerated deterioration are unknown to the appraiser at the time he carries out the appraisal. Moreover, this situation is amplified by the many improvement works carried out without a building permit. Permits are the appraiser’s primary source of information.
Do you have questions about the real estate market to submit to our team?