How Sales Affect Your Property Assessment
To determine your property's current value, we typically use the "direct comparison approach." This means we look at the recent sale prices of similar properties in your neighbourhood and/or similar neighbourhoods to estimate the value. We then adjust it based the differences, as well as other factors related to your property.
How we decide which sales can be compared
A single property that is similar to yours could sell within a range of values. There are different factors affecting the sale price, so we take that into consideration and ensure that we compare multiple sales that are suitable to determine the market value of your property.
In some cases, a property sale price may be adjusted before it is used, and in others we may exclude it altogether, as detailed below.
Sale values that we adjust
The sale did not take place on the valuation date
We determine the market value of a property as of a specific valuation date, for example, January 1, 2016 for taxation years 2017 to 2021. If the property's sale happens a month or more before or after the valuation date, we time-adjust the sale price to account for any rise or fall in the real estate market.
We base our time adjustments on analyses of other sales in the same market area and we review when that sale price was negotiated. In the case where a sale is registered some months after the price is negotiated - for example, new construction and condominiums - the sale price may not reflect the market value at the time of registration.
The sale price is not typical, but within the range of value
Buyers and sellers are motivated for different reasons that affect how much they are willing to pay or sell for. For example, some buyers are willing to pay more because they want to live on a particular street, close to a preferred school, or they may like a certain feature of a house. Prices can also be influenced by:
- The supply and demand for properties in a neighbourhood at the time of listing.
- The negotiating skills of either party.
- The financial circumstances of either party.
- The length of time on the market.
These are still open-market transactions, but the motivations of the buyers and sellers result in a range of values within which a property may sell.
Sale values that we exclude
The sale is not an open-market transaction
If the sale was not an arm's length transaction between willing and knowledgeable buyers and sellers, it is not considered to be an open-market transaction and will be excluded from our sales analysis. For example, if the sale:
- was between related parties such as family members or subsidiary companies
- was forced, for example, under mortgage foreclosure or power of sale
- happened under duress through situations such as a family break-up, estate sale, expropriation or a tax sale
- is a builder/developer sale
- is a quit claim, clearing of a title
- was speculative
- had non-typical financing
- was for a partial interest in the property
- included chattels, crops and/or goodwill.
A change to property takes place after the sale
If a physical change is made after the sale, then the transaction price doesn't represent the value of the property in its current state at the valuation date, and is excluded. An example of this would be tearing down the primary structure and replacing it with a new one after the property is sold.
The sale price does not reflect the "unencumbered fee simple"
"Unencumbered fee simple" is a phrase used in the Assessment Act stating that the current value as of the valuation date is what it would be if the property was sold at arm’s length by a willing seller to a willing buyer if unencumbered.
There may be circumstances affecting the sale price so that the price does not reflect the unencumbered fee simple. In these cases, the sale price is not appropriate to use as the current value. These circumstances may include:
- the sale does not include all the interests in the land.
- leases or other transaction terms that do not reflect the current market.
- lack of exposure of the property to the market.