Many home sellers and buyers in the Calgary real estate market have confessed to being confused by “assessed value” and “market value.” It can be challenging to distinguish these two terms, especially for those who’ve only been in the real estate scene for a while. If you’re one of them, don’t lose sleep over it.
The assessed value of a property refers to what local authorities use for the taxation process. Most homeowners like it when this value is low because it translates into fewer property taxes for them.
On the other hand, the market value is the amount that a potential buyer can pay for it without any qualms. Lenders consider this value when identifying the loan amount to offer a borrower/ potential homeowner. Home sellers like this value to be high because it means more money for them.
How to calculate a property’s market value differs from determining its assessed value. Let’s go through what happens in these two processes.
When you want to know a property’s market value, hire a qualified home appraiser. A top Calgary realtor can also do it for you. These professionals put several factors into account when calculating your home’s market value. The most important ones are:
Calgary has specific rules to calculate the assessed value of properties to determine the taxes the owners should pay annually. Although these regulations might differ from those of other cities, the basic steps are the same.
The city hires a qualified property assessor to calculate a particular home’s assessed value. It usually is a percentage of the property’s market value. Accurate real estate data is critical when calculating assessed value. That’s why some assessors visit the home’s location to inspect it, although they could use specific software to do so.
Other things that the city assessor factors in when calculating the assessed value include:
After the assessor determines the value of your property, they’ll deduct any tax exemptions you’re eligible for at the time. Then, they’ll multiply that amount with the Calgary assessment rate, which is a percentage that the city has set to know your property’s taxable value. Your property taxes will be calculated based on this value.
Let’s assume the assessor concludes your Calgary real estate property is worth $600,000. If this city’s assessment rate is 80%, then your home’s assessed value is $480,000. This is the amount the local authorities will use to calculate your property taxes yearly.
Notably, the valuation of Calgary properties changes from year to year, based on changes in the market.
As you have seen above, the procedure followed when calculating assessed value and market value is not similar. It’s worth noting that the market value of a property impacts its assessed value.