How the market value of a home relates to its city value?
The most common question asked by home buyers is how the market value of a home relates to the city value for local property tax assessment.
The market value of a home may rise or fall depending on the demand and supply of homes. The housing market works in cycle and may last for many years. A housing cycle may last from 6 to 10 years with home prices going up or down.
What we can learn from the city assessment value?
Homes sales are collected and the sales data collected in the database are used to establish the assessment values of homes for the following year. The market value of a home lead the city assessment value which is derived and compiled for collection of property tax revenue by the Provincial Government.
The city value is commonly used by a home owner or a buyer to gauge the housing market price. In a rising market, the city assessment value tends to be lower than the market value of a home. During the boom years from 2005 to 2007, the selling prices for most homes were found to be 12% to 15% above the city assessment values.
Market value going below city value
Conversely, in a down housing market, home prices after dropping for a few months will result in homes selling at or below city assessment values. As seen from a comparison done recently, the average resale older homes in West Richmond was found to be selling at 7% below the city assessment value during the 4th quarter of 2008.
Most home sales over the past 60 days were at or below the city assessment values. I will provide an analysis later on how the market values for detached homes, townhomes and condos in Richmond compared with their city assessment values.
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