Assessed Value vs. Fair Market Value

I got my Property Tax Assessment in the post the other day, so I thought this a perfect opportunity say a few words about Assessed Value versus Fair market value, two very different things.

For Pender Island, 2010 was the first year since 2003 where significant amount of properties had a drop in assessed value. Some remained the same and some even increased, but this can be very confusing for buyers and sellers. The buyer sometimes assumes that assessed value is the same as fair market value, a common mistake for sellers too. The difference, and it is a very important difference,  can be summed up succinctly below. Or you can check the following link for BC Assessment's official explanation:

 http://www.bcassessment.bc.ca/pdf/publications/fact_sheets/FS05_Market_Value_Property_Assmt.pdf:

Assessed Value vs. Fair Market Value - Assessed value is the valuation placed on property by a public tax assessor for purposes of taxation. It is not the same as Fair Market Value. Fair Market Value is the agreed upon price between a willing and informed buyer and a willing and informed seller under usual and ordinary circumstances. It is the highest price estimated in terms of money which the property will bring if exposed for sale on the open market with reasonable time allowed to find a purchaser who is buying with full knowledge of all the uses and purposes to which the property is best adapted and for which it can be legally used. In other words, assessed value is not a 'silver bullet' figure from a government body that dictates to the purchaser or seller the value of real property. Tax assessments look at the big picture whereas fair market value looks at specific properties and their individual worth to a buyer at that particular moment in time.

This is particularly the case in rural markets such as Pender island. We just don’t have the volume of sales to create an accurate statistical model in the same way that the Vancouver or Victoria market does. When a property on the island is assessed it is done with scant data, and very rarely in person. So be careful with using assessed values when either listing your home or making an offer. They are good for a ballpark estimate, but each property has unique characteristics that will offer value for one buyer and not another.  Real estate is worth what someone is prepared to pay for it, and that is called a free market.