house appraisals in my area | What is municipal evaluation worth?

What is municipal evaluation worth?





Depending on the volatility of the market, the difference between ... (PHOTO THINKSTOCK)
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Depending on the volatility of the market, the difference between the posted price of a property and its municipal valuation can vary a lot.



The Press
Depending on the volatility of the market, the difference between the posted price of a property and its municipal valuation can vary a lot. Nevertheless, some buyers and sellers refer to the municipal valuation to establish a market value. Is this a good practice? Specialists are looking into the issue.

Distinguish between municipal valuation and market value
The municipal assessment of a property is made on a given date and governed by the Act respecting municipal taxation. "The valuation price is based on a property value established on July 1, 18 months before the next tax roll," says Richard Côté, chartered appraiser and member of the Board of Directors. Order of Chartered Appraisers of Quebec (OEAQ). Thus, for a 2016-2018 assessment roll, the value that is given to a house is that established a year and a half before the coming into force of this one, ie in 2014. And this same value will be used until 2018.

"Normally, the municipal assessment takes into account all the physical characteristics: living area, lot size, if there have been renovations, the area, etc. ", Assures the evaluator. Nevertheless, this is a mass assessment where more statistical tools are used to determine the value of a house. According to the municipalities, a single appraiser may be responsible for 25,000 or 30,000 properties to be assessed and is not able to visit each of them.

According to Mr. Côté, it is not recommended to use the municipal valuation to fix the sale price of a property because of the time elapsed between the date of the assessment and the duration of the roll. "To establish a selling price, the wisest is to ask for an evaluation report made by a certified appraiser who will be able to carry out a specialized expertise of the property. "

A fair and reasonable price

In order to evaluate a property, the most reliable method is the comparison method. "It's about using comparable properties in terms of location and physical characteristics (area, single-family or condo or other types, number of floors, year of construction, etc.)," ​​says Côté. Subsequently, the appraiser makes adjustments to take into account the physical or location differences for each of the comparables in relation to the property to be valued. "

In the case of a bungalow or a condo, we can hope to obtain an evaluation report for less than $ 500. Its validity over time depends on the volatility of the market. When these are stable, its accuracy and relevance lasts about 6 months.

Choose the right appraiser

In order to have a fair view of the value of a property, the most objective person is the chartered appraiser who has no interest in the price that will be determined and who must work in accordance with the standards of practice established by his professional order.

In Quebec, the Professional Code reserves the title of chartered appraiser to the members of the Order of Chartered Appraisers of Quebec (OEAQ). However, the act of assessing the value of a house or building is not exclusive. There is a difference between a professional evaluator and a chartered appraiser. "Our role is to protect the public," says Côté.

"Buying a property is probably the biggest investment of a lifetime. Still need to pay the right price.

" Richard Côté
Chartered appraiser and member of the board of directors of the OEAQ
Negotiate on the basis of municipal evaluation

For Allan MacDowell, licensed real estate broker, the municipal valuation is a benchmark against the selling price, but should not be used to establish the market value of a property. This is true even though the statistics of recent transactions in a region may confirm that the price displayed, the sale price and the municipal valuation are relatively similar.

"At the time of sale, we must observe comparables sold in the same sector in the last six months and take into account the particularities as in the case of bank repossessions, cannabis planting, succession or serious problems with the house that have an impact on the market value of the property, "says MacDowell.

Buyers use a municipal valuation that is generally lower than the asking price to justify lower bids. "The same is true of sellers and their brokers who display a asking price approaching the valuation, or even below, to dazzle their proposers buyers a good deal," says Max-Philippe Bissuel, licensed real estate broker. Although the practice is widespread and this relationship between municipal valuation and posted price remains for some of the bargaining arguments, for the broker, the assessment made by the municipality is not an index of the price to be paid.

The case of banks

On the side of mortgage lenders, the market valuation is especially important. "In most cases, we work with a professional evaluation report. With this one, we do not take into account the municipal evaluation to establish the amount of funding granted, "says Luce Samson of BMO Financial Group.

In some cases and depending on the percentage of financing, the lender can work with a value according to the municipal evaluation, according to criteria already defined. "There are several exclusions from valuation waivers, but generally, if the property is in compliance and the loan amount does not exceed 65% of the purchase price or the total amount of the loan does not exceed 60% of the value of residential property for refinancing, we can use the municipal evaluation only, "says Samson.

Consult the website of the Order of Chartered Appraisers of Quebec.

Marked gap, active market
Large differences between the municipal valuation and the price paid for a property usually indicate a more active market.

"For the role tabled in 2010-2013, in areas such as Montreal, Quebec or Laval, there were increases on the residential side, which were around 30%. That's almost 10% a year, recalls Richard Côté, chartered appraiser. In this case, when the value of the property was disclosed from the municipal point of view, ie 18 months after its evaluation, there was already a 15% difference with the market value ", illustrates Richard Côté, chartered appraiser. During this period, the municipal valuation was therefore well below the market value.

After years of dynamic and fluctuating markets, increases in recent years have tended to stabilize, although some specific sectors are not following the trend. "With a more stable market, the difference between valuations and market values ​​tends to reduce", summarizes Max-Philippe Bissuel, Chartered Real Estate Broker.

GAP BETWEEN EVALUATION AND PRICE

Here is the ratio between the sale prices and the municipal evaluation ratio in 2014 and 2015 for a single-family home in a few cities in Quebec. A value of more than 100% represents a higher sale price than the municipal evaluation. When prices are lower than the valuation, therefore, the value expressed goes below 100%.