Real Talk!

Ontario Property Tax Assessments are calculated using ‘current market value’.

Current value is the most probable price a property should bring in a competitive and open market under all conditions of a fair sale. While a sale price is a good indication of current value, it is a recognized appraisal principle that a given property can sell at any point within a range of values.

This is because the real estate market is not perfect and two identical properties can sell for different amounts depending on such factors as supply and demand of housing in the local real estate market, preferences of buyers and sellers and the negotiation skills of the parties. A selling price represents the price a buyer and a seller agree to in one particular transaction, whereas current value assessment is based on the most probable sale price based on an analysis of all sales transactions from the local real estate market.

All offers have a standard clause in this regard. `` 19. PROPERTY ASSESSMENT: The Buyer and Seller hereby acknowledge that the Province of Ontario has implemented current value assessment and properties may be re-assessed on an annual basis. The Buyer and Seller agree that no claim will be made against the Buyer or Seller, or any Brokerage or Salesperson, for any changes in property tax as a result of a re-assessment of the property, save and except any property taxes that accrued prior to the completion of this transaction.``

We are told that every sale affects calculations and, I’m sure, the same must stand for assessments that are reduced, after appeal.

The problem is that Sellers usually want to sell for more than their municipally “assessed value” – after all, their insurance company has also given them an assessment of value that is most often always a great deal higher than their municipal assessment.... AND Buyers usually want to pay the municipally “assessed value” or less. Frighteningly, also, there are times that the municipally assessed value (upon which the property taxes are calculated) is a great deal higher than the ultimate selling price.

The current unreliability of municipal assessments has caused most real estate professionals to leave that field blank on listing forms. It only causes confusion and it takes a great deal of time to try to explain. A good Buyer representative will usually broach this matter.
Here are some examples. These come from the data of actual sales. In the interest of the privacy act, I will not provide the actual addresses. However, I will have the complete information on file, should anyone feel the need to question authenticity.

In August of 2009, a cleared vacant lot (63’X100.55’) in the town of Bancroft was listed for $9,900. The listing showed that the property had been assessed at $31,000 and that the property taxes (for 2008) were $135. This lot sold, in September of 2009 for $8500. (please note it is most unusual for a property to sell below the municipal assessment- this is one of the weird instances)
In March of 2008, a treed, 1.01 Acre lot listed for $24,900 sold for $23,000. The assessed value was noted as being $19,500.

In March of 2009, a property described as: “2 bedroom well maintained home in downtown Bancroft. Municipal services, potential for commercial zoning, great investment! Bright home, detached garage, paved drive, full unfinished basement” was listed at $129,900. The listing shows an assessed value of $67,000. The property sold in September 2009 for $130,100.

In May 2009, a property described as: “3 Bedroom bungalow in town of Bancroft with municipal services. Nice level yard with perrenial flower beds and sun porch facing backyard. Newly renovated main bathroom and new shingles this year. Third bedroom, rec room and second bathroom in fully finished basement. Attached carport.Great starter home or retirement home, easy to maintain. Storage shed in back yard.” Was listed for $149,900 and the listing showed an assessed value of $114,250. The property sold June 2009 for $140,000.

I could go on ad nauseam.

The municipal assessment value may make more sense in the future... right now, it's information, but it's unreliable.

I don’t want to even get started on insured values! Suffice it to say... the insurance company will see your house as a castle.