Is there any accurate and reliable relationship between assessed value and selling price in Waterloo Region? I’ve been following sales in our neighbourhood for a couple of years, and the discrepancy between these values can border on the ridiculous. Isn’t a property assessment supposed to reflect the approximate market value of the home? – PRICE PITFALLS
DEAR PRICE: A property’s assessed value is rarely the same as its market value, and the disconnect only widens as selling prices climb.
MPAC (Municipal Property Assessment Corporation) is the government body that evaluates property values for property tax purposes. They re-assess properties every four years, and with some 5 million properties in Ontario, there is no way to consider each one on a case-by-case basis. Instead, MPAC feeds data such as lot size, living area, street location, postal code, the age of the home and the quality of its construction into a complex algorithm that determines property values based on sales trends in the area.
Market values are constantly changing — and are generally on the rise. This means MPAC valuations are, at best, a single snapshot within the four-year assessment cycle. Our local market values have increased by over 50 percent in the past four years, which means current assessments are stuck in a time warp as they wait for MPAC to catch up. Having viewed tens of thousands of listings in K-W, I struggle to recall ever having seen one where the assessed value and market value were equal. Barring a significant market downturn, I wouldn’t expect that to change.
MPAC gets a copy of every closed building permit, so if you double the size of your house, you can expect your assessed value to go up, even if your neighbour’s doesn’t.
My wife and I renovated the historic Robert Orr House in Kitchener a few years ago. We added a front porch and large covered back porch, then received an extra property tax bill for $511.20. This was an example of a reassessment triggered by a closed building permit.
Major renovations aside, don’t panic if your assessed value rises suddenly. The same should happen to the other homes in your neighbourhood as MPAC works their way through the assessment cycle. Because municipalities are revenue neutral, it’s reasonable to expect that everyone will take on their proportional share of the tax burden as property values increase.
PRO TIP: In this age of rapidly rising property values, it would be rare for an MPAC assessment to outpace the market, but if it happens, there is recourse. If you feel that MPAC’s assessment of your property is too high, you can file a Request for Reconsideration (RfR) come springtime. I’ve been through this process personally on four occasions, so if you are wondering about it, feel free to give me a call. #AskDavid #Advice