Market Value vs Tax Assessed Value - What’s the Difference?
Let’s look at how the Market Value of a home is determined.
MARKET VALUE of a home is a constant moving target and can change from moment to moment depending on if you are a buyer or seller. This can be frustrating, and many people don’t understand that the LISTING PRICE of a home is not fixed or absolute. In REAL ESTATE the LISTING PRICE is just a starting point to determine MARKET VALUE by commencing communications between two parties that are interested in Selling and Buying. Once these communications are finalized and all terms and conditions are met, MARKET VALE is determined.
Lets say you go to a hardware store and purchase a hammer that you want or need. The PRICE of that item is fixed, and you purchase it because you need it and its priced right for you. You typically do not go to the till and negotiate the price with the till person.
In Real Estate, REALTORS® use comparable recent sales of similar homes in style, size, and location to come up with the “asking LIST PRICE” to attract a BUYER to come view a home and determine if the home suits their needs, wants, emotions and budget.
So, in plain English the Market Value is “the price a buyer is willing to pay for a home, and that a seller is willing to accept.”
Let’s look at how the Assessed Value of home is determined.
Determining the Assessed Value of a home depends on why the property is being assessed and for what purposes.
When trying to understand the assessment value of a property, you must know who is doing the assessing and why the property is being assessed. Banks will send a property assessor to determine loan values. Insurance companies will send a property assessor to determine replacement cost of the buildings. City of Winnipeg or Municipalities will send a property assessor to determine value for tax purposes.
To arrive at the City of Winnipeg Assessed Value for Property Taxes, the assessor looks at what similar homes have recently sold for in your area with any recent improvements, and any rental income you may be making from the property. The Assessed Value is then multiplied by a “MILL RATE” for your area to determine the tax you pay on your property.
You may be asking now what is a “MILL RATE” and how is it Set?
Mill Rates are based on the total value of all properties within a municipality, to provide the necessary tax revenue to cover projected expenses in their annual budgets, including things such as infrastructure, police and emergency services, and public schools. For this reason, and also because of fluctuating real estate values, a tax assessor typically updates the taxable value of the property every few years. As we already know these values are constantly changing and it is impossible to determine a Mill Rate at any given moment. Mill rates also frequently vary for different types of property, areas of the city and for residential, commercial, or industrial properties. Hence why you will see an Assessed Property value that is lower than the current market value.
For example, let’s say your mill rate has been calculated @ 10. That means that your property tax is equal to 1.0% of your property's assessed value. To calculate your property tax, they multiply your property's mill rate (10) by the assessed property value ($400,000) and divide it by 1,000. Your taxes will be $4000 for that year.
In the end, the assessor comes up with an assessment value of a home and uses the above formula to come up with the Assessed Vale for Tax Purposes. The higher your home value the more taxes you will pay in taxes. Don’t be upset if your Assessed Value is lower than what you thought! It just means you are paying less taxes than the Market Value.
A little confusing, I know, but if you feel your property is assessed higher than what you think your property is actually worth you may want to have your property re-assessed. You can apply for a review of your property with the City of Winnipeg Assessment Department by visiting their website @ https://legacy.winnipeg.ca/clerks/TOC/boardofrevision.stm
Just be aware they may charge you for doing the review!
If you would like a COMPLIMENTARY MARKET VALUE assessment to determine its true current value compared to the ASSESSED VALUE before you apply, I would happy to complete a REPORT that you can take with you to justify your concerns to the board. I’m here to help!
You can also visit my FREE HOME EVALUATION page and enter your details here: https://tonyrinella.com/home-evaluation.html
Tony Rinella – B.A. Urban Studies (1981)
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