Yesterday I blogged on the method BC Assessment values properties in BC. I promised to do a follow up today. Reading the title of this Blog you think I'm crazy, but I'll repeat it. Should a Property Owner Request an Increase in BC Assessment Property Value? Huh? Yes, you read it right the second time as well.
The short answer is "No", but that's not the only answer. If you let sleeping dogs lie, you will likely not have an increase in property taxes if you have made no significant changes to your property. In fact, as newly built houses pop up with higher values in your neighbourhood, comparatively your value goes down as your house ages. The only reason your property taxes would increase in this circumstance is if your city budget increases and the property tax percentage rate increases to meet the budget.
So ... why on earth would anyone in their right financial mind request an increase in the assessed value and ultimately pay more property taxes? There is one reason: Your house is undervalued and you intend to sell it within the next year.
Buyers will look for any reason to pay less than the listed price for your home. In fact, they almost always pay attention to the most recent BC Assessment, and in my experience they have a really hard time paying over the assessed value.
I'm going to create a not too uncommon situation to illustrate how this could play out. Jill's's home is assessed at $682,000, but realistically she is very confident that it would sell closer to $750,000. This is not just her opinion, she's also had a realtor give her a CMA (comparative market analysis) at that price as well. If you remember my blog from yesterday, the BC Assessment valuator rarely enters your home, so the realtor would have more tools for a proper valuation.
Buyers and realtors both know that BC Assessments can be wrong. Despite this knowledge, as a realtor I know first hand that buyers often really fixate on the assessed value. They are justifiably scared that they are overpaying if the assessed price is lower than the list price. So you see where I'm going with this? A buyer, Jack, is now interested in the property in the above situation but is only comfortable going to $722,000. Other buyers are also spooked by the $40,000 discrepancy the BC assessed value. Jack will go no higher, Jill will go no lower. They are just too far apart and that deal dies.
So, if in the scenario above, let's start over and Jill, knowing she intended to sell, successfully got their Property Assessment increased to a level closer to what the list price would be --- say new valuation of $738,000. Jack, the potential buyers is now far more in his comfort zone. After all, the BC Assessment is close to the list price. The Offer and Counter go smoothly and the the property ultimately sells for $746,000. In this case, the buyer sold for $24,000 higher than above with the wrong assessment holding them back. A home will sell for whatever the market dictates and the market is rarely wrong, if all parties are using accurate information.
In the first scenario, the buyer did not get the property they desired and the seller did not get their fair price. In the second scenario above, the deal closed at the market value, and the buyer and seller are both pleased. Also, the buyer should be neutral to the fact that the BC Assessment was increased before the purchase because, the BC Assessors keep track of sales and their subsequent BC Assessment as new owners would have gone up anyway based on the sale price.
Like George Peppard always said on the A-Team, "I love it when a plan comes together".