“May you burn in hell if you are lying!” uttered the diminutive elderly woman darkly, shaking her City of Winnipeg Property Assessment Notice vigorously in my direction.
I had just explained to her my Comparative Market Analysis (CMA) of her home’s market value and my explanation had seriously violated her expectations.
As is often the case, the city-assessed value was not in line with her home's market value, clocking in at roughly $30,000 higher than what market evidence suggested her home would sell for in its current condition.
There were several relatively easy ways to raise its market value, but it would mean spending some money to get more back, the thought of which was completely overwhelming to the unhappy homeowner who stood in front of me, quivering with outrage and alternating between feeling betrayed by the city and feeling suspicious of me and my motives.
I was not offended. All of this woman’s future plans rested on that assessment value being accurate and it was a shock to be told that assessment value and market value can be different.
I totally get it.
In an ideal world, the two would be interchangeable but here in the real world, there are too many variables at work in the way we have it set up for that to be the case.
It’s a shame that this conversation came so late in the game for this homeowner - her assumptions around this had been operating unchallenged for a long time and were deeply entrenched. One of the very first things I tell my Buying clients when I am teaching them how to read a listing is to take the assessed value with a grain of salt.
My experience is that the relationship between assessed value and market value is loose at best and varies from property to property. Some assessments are higher than market value and some are lower - sometimes by as much as $30,000, as was the case here.
When I see a listing that says “Priced well under assessed value” I assume that the assessed value is out of whack and the listing agent is trying to spin that to their client’s advantage, an unfortunate practice which serves no one.
On the flip side, when the price is significantly higher that the assessed value, if there is any evidence of this in the listing description at all, it will be something celebratory about the property’s low property taxes.
The little-talked-about reality is that market value is only one of many different kinds of value operating in real estate. And I’m willing to bet that how it is determined and how it differs from all of the others – assessment value, replacement value and appraisal value to name a few – will surprise you.
Over the next few weeks, I’m going to take the notion of value apart and put it back together again so that you, whether you are currently own a home or aspiring to own a home, don’t get caught off guard or find yourself basing your plans on a market value that isn't what you think it is.
Before I sign off, let me tell the end of story, for those of you interested in how it turned out for this distressed, irate homeowner.
Before I even entered the picture, she had turned down a cash offer from an unrepresented buyer that was $33,000 less than the city-assessed value. That offer, which involved paying no commission fees or undertaking any renovations whatsoever, represented a take-the-money-and-run opportunity in my opinion.
Ultimately, the homeowner hired a Realtor to list her home – not me – and it debuted on the market with a purchase price a few thousand below its assessed value. Several potential buyers expressed interest but not at that price. (I have my ways of knowing :)
After 66 days on market with no price reductions, the listing expired, at which time, the homeowner hired a different agent and started over again with a price drop of $10,000. Two weeks later her home sold for $15,000 less than that. In fact, the sale price was just $1000 shy of the cash offer the homeowner received back in the beginning.
Except that the homeowner had to pay several thousand dollars in commission fees and endure 3 angst-ridden months of having her home on the market.
Ouch. I wish I could have spared the homeowner this, but her lack of exposure to the truth left her vulnerable and the only way she could be convinced was by taking this hard path, confirming, once again, that knowledge is power.
Merry Christmas, everyone! The real estate market typically slows down during this time of year, although it does not come to halt. (As an aside, you might be interested in knowing that what DOES sell in this time frame DOES NOT sell for less - that is a myth and I can prove it with numbers.)
If you have any feedback, questions or need help with a real estate matter, please get in touch. firstname.lastname@example.org (204) 979-0640