This week’s column is a continuation of last week. I have been having a lot of conversations about the value of real estate in Dawson Creek more than usual lately. That is because homeowners got their 2013 assessments in recent weeks. I thought it would be worth to expand on an examination of the value of real estate as an asset and the different sources that people access to try to determine it.
Real Estate is theoretically a perfect market. There are many buyers and many sellers and they interact freely to determine the value of the properties that are being bought and sold. While there are list prices, there are no price tags. Everything is negotiable and knowing the market in which you are operating is the key to paying the right price for the right property.
There are many different measures of value. The assessed value and the appraised value are two measurements that people often rely on to help them determine the value of the property they are buying or selling. While they can be good rules of thumb, it is important to remember that the real price of a property is the price that a willing buyer and a willing seller agree it is worth.
The assessed value is the least accurate. The assessed value is simply the dollar amount that the government feels they can fairly tax without causing too many people to complain too energetically. They are far from scientific. They are done en masse so details about specific properties are pretty much ignored. Also, time is a very important factor when determining the value of a property. Assessments are performed once a year and become dated very quickly. They can be used as a reasonable rule of thumb, but do not rely on their accuracy too heavily.
The appraised value of a property is an amount determined by a certified real estate pricing professional. Banks trust them to make correct judgements of value in order to lend money to purchase or refinance homes. They are governed by the AAIC who hold them accountable for the valuations that they provide to people. A certified appraisal as a measure of value will also hold up all the way to the Supreme Court of Canada. However, unless the appraiser buys your house, the actual market value has yet to be determined.
So what is the actual value of a property and how can you know? Is it the assessed value? It is, but only if the government will buy it from you. Is it the appraised value? It is, but only if you are refinancing or if the appraiser will buy it from you. Ultimately the value of a specific piece of property is what a willing buyer and a willing seller will agree it is worth.
In addition, it is very important to note that different people want different things. They will pay more or less for something based on their needs and how well a piece of property fills those needs. What you want in a home was probably not taken into consideration by the assessment authority or the appraiser. What you value will affect what you will be willing to pay for your home.
The assessed value will give you a very general and broad idea of a property’s value. An appraisal will give you an indication of the value of a property relative to similar properties that have sold recently. However, having a firm grasp on what you value in a piece of property is ultimately the most important knowledge that you need to pay the right amount for the right property at the right time for you.
Kevin Kurjata is a Dawson Creek Real Estate Specialist with Remax Dawson Creek Realty. Go to www.kevink.ca/forbuyers.php for more information on the steps you can take towards purchasing your first home. He can be reached at 250.719.3538 or at firstname.lastname@example.org">email@example.com.