The success of a real estate transaction largely depends on setting the right selling price for your property. It’s crucial to avoid basing your sale price on the municipal assessment. Instead, you should focus on the property’s market value.
In this article, we’ll clarify the distinction between these two concepts and explain why pricing your property according to its municipal assessment can lead to missteps. Let’s see why.
What is a municipal assessment?
Accurately estimating a property’s value can be challenging. Many people, hoping to save money while finding the optimal selling price, might be tempted to rely on the municipal assessment instead of hiring a professional appraiser.
However, this is a mistake. The municipal assessment and the market value of a property are not the same. While both assessed value and market value are calculated using similar techniques, they serve very different purposes.
Municipal assessment: calculating your property taxes
As the name suggests, the municipal assessment is conducted by the local municipality to determine property taxes for homeowners. Its primary function is to help the municipality establish how much homeowners will pay in taxes each year.
It is calculated using a standardized method that only takes into account certain general criteria. It does not reflect:
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The specific characteristics of your home.
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The recent improvements and renovations you have made.
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The actual market fluctuations (particularly when the market is very active).
This estimate is therefore primarily an administrative tool, rather than a reliable reference for assessing the actual value of a property on the market.
A property block analysis
During the property evaluation, certified appraisers are employed by the city to conduct a mass appraisal of properties. This means that the values are estimated for groups of comparable homes rather than for each individual property. As a result, your home’s value is approximated based on similar properties in the area.
The municipal property evaluation is not done precisely for each individual property. It only serves to provide an approximation of property values, not the actual market price of each.
An inaccurate and outdated value
The municipal evaluation is valid starting July 1st, 18 months before the city’s evaluation roll comes into effect, and it is only redone every 3 years. It does not track market instabilities or conditions, as it is fixed for several months.
Therefore, it is not representative of the actual price you could get for your property if you decided to sell. In fact, it will generally be lower than the market value, since the real estate market will have evolved in the meantime. This is yet another reason not to consider it when setting the sale price of your home!
Market value: the best indicator for setting the sale price
Market value is the actual price that buyers are willing to pay on the market at the time of sale. It is a dynamic data point that reflects the current economic reality, allowing for the setting of a competitive and attractive sale price.
A tailored estimate
Market value is determined specifically for your property by a professional who takes into account various factors, including:
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The condition of the house, both inside and out.
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The year the property was built.
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The size and location of the land.
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Current market trends and local supply and demand.
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Recent sales of comparable properties.
By considering all of these elements that can influence your home's price, a market value estimate is far more accurate and relevant than the municipal evaluation when it comes to a real estate transaction.
A true representation of the real estate market
Unlike the municipal evaluation, market value is not fixed. It changes continuously, especially in response to fluctuations in supply and demand within the real estate market. This is why it remains valid for only a limited period (typically a few months, depending on market conditions), after which it needs to be recalculated.
In most cases, it is higher than the municipal evaluation, although in certain situations (such as a market slowdown or deterioration of your property), it could also be lower.
How to determine the fair market value of a house?
To establish a fair and competitive price for your property, certain methods should be prioritized. Here are the available options, along with their respective advantages and disadvantages.
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Relying on the municipal evaluation: a bad idea
Now that you understand the difference between municipal and market value, you can see why the municipal evaluation should not be used as a reference when setting your property’s selling price.
It doesn’t account for the real estate market conditions at the time you decide to sell. Since it’s outdated, basing your home’s selling price on the municipal evaluation is likely to distort the price. In most cases, it will be underestimated, leading to a loss of potential profit. However, it could also be overestimated, which might discourage potential buyers. Either way, this approach is not in your best interest.
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Estimating the market value yourself
Market value is the most accurate estimate for setting your home’s selling price. It closely reflects your property’s true value, as it takes into account the real estate market conditions at the exact time the property is listed for sale. A well-defined price will help ensure a smooth real estate transaction.
You might be tempted to estimate the value on your own, but it is not recommended. Although online tools like automated estimators or platforms that compare sales in your area can give you a rough idea of your home’s value, they have limitations.
By attempting to set the price yourself, you risk overlooking key factors or relying on inaccurate data. While this approach might save you money, it could end up wasting your time and costing you more in the long run.
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Having your house appraised by a professional
It’s always a good idea to consult a professional, whether it’s a real estate agent or a certified appraiser, to determine your property’s market value and set the right sale price. This is the most reliable way to know your home’s true market value. In fact, only a real estate expert can provide an accurate appraisal of your home.
Choosing a professional appraisal guarantees that you’ll receive a precise and tailored estimate of your property’s value, saving you time and ensuring a smoother real estate transaction.
Real estate agent or certified appraiser: who should you hire to appraise your property?
Depending on your situation or the reason you want to determine your home’s value, you can choose between two specialists: a real estate agent or a certified appraiser.
Not sure which professional to work with? Keep reading to help make your decision.
Certified appraiser: the expert in property valuation
The certified appraiser is the first expert that comes to mind when it’s time to evaluate a property. They have extensive training in real estate appraisal and the skills necessary to accurately determine the market value of your house, condo, or any other type of property.
By visiting your home and using several appraisal methods, they can provide a detailed report that justifies the established price for the property. This report is a valuable document to show potential buyers that the asking price is realistic and reflects the current market conditions.
What is the price of a certified appraiser in Quebec?
If you plan to hire a certified appraiser, you should budget approximately $650 for a single-family home. The cost may be higher depending on factors such as the type of property (e.g., a duplex), the region, and the experience of the appraiser you choose to hire.
Real estate agent: an ally for selling your home
If you're already working with a real estate agent (or plan to soon), it's important to know that this professional also has the expertise to assess the market value of your home. Moreover, their appraisal services are typically free of charge, as they are compensated through a commission once the sale is completed.
To determine the market value, the agent relies on real estate statistics, such as comparable properties and recent sales in the area. While their evaluation is less formal than that of a certified appraiser (since it doesn’t come with a detailed report), they can still provide a reliable estimate to help you set the optimal selling price.
How to maximize the market value of your home?
Renovations and improvements can significantly impact the market value of a property. A freshly renovated home with modern design is likely to see its value increase. On the other hand, if no updates have been made in years, the market value may decrease.
However, not all improvements have the same potential to boost your home's market value. Be sure to gather information on which renovations are most cost-effective and likely to provide the best return before listing your home for sale.
Looking for an expert to determine your property's market value?
XpertSource.com can help you find a certified appraiser or a real estate broker. When you tell us about your project, we put you in touch with qualified resources for FREE. Simply fill out our form ( it only takes a few minutes ) and we will connect you with professionals.
