Municipal Evaluation vs. Market Value
Can you rely on your municipal assessment to determine what your home is worth? The short answer is no, you can’t.
There is a common misconception that there is a strong correlation between the two. We often hear things like "homes in my area sell at 20% above the municipal evaluation so since mine is evaluated at X it must be worth Y."
Another comment we often get from buyers new to the market goes something like this:
"You’re asking $1M for this house? But the municipal assessment is only $700K. It must be way overpriced."
They soon get it after we explain that market value and municipal evaluations are very rarely correlated, and we inform them that the home in question sold within 5 days and for more than the asking price.
Municipalities do evaluations to update their tax rolls every 3 years but they can’t possibly visit each property in a given neighborhood. That would be too time consuming, so they just apply an average value based on things like lot size, location and the size of the home. They rarely get it right.
The current municipal evaluations in Montreal are based on assessments from 2018 and will be used all the way through 2022. It will be interesting to see what happens when the new tax rolls come out in 2023 since not all homes will appreciate at the same rate.
For example, there may be some properties that haven’t been renovated in 30 years, in which case the market value could end up coming in below the average formula the city uses to evaluate properties. In these rare cases their assessments may be higher than their market value.
In the past, we have helped clients contest their evaluations when we felt the evaluation used to determine their municipal taxes were much higher than actual market value.
With our help, they sent a detailed market analysis to the city for re-evaluation. That process will need to be completed before April 30th, 2023 for the next evaluation roll and there is a sliding scale for the cost to apply depending on the value of the property.
It’s important to remember that the true market value of a property is always based on supply and demand. In other words, what a prudent buyer will pay for your property after having reviewed similar properties that have recently sold and having seen similar properties currently listed in your area. This is constantly evolving and changing.
If you want to know what a given property is worth in today’s market, you need to either have a realtor or a professional appraiser conduct a detailed market analysis. Don’t rely on what the city has valued it at for taxation purposes.
If you would like any advice or recommendations all you have to do is call 514-700-2604 or send an email to email@example.com. You might also consider joining the Homeowners Advisory Club. It’s the first real estate concierge service designed to help you protect and maximize the value of your home over time.