Definition of "Market Value"
It’s important to define and understand what “market value” is and how it relates to your assessment. Market value for assessment purposes is legally defined in Section 1(1) of the MGA as follows:
(n) “market value” means the amount that a property, as defined in section 284(1)(r), might be expected to realize if it is sold on the open market by a willing seller to a willing buyer;
The Appraisal Institute of Canada discusses market value at length in the second chapter of “The Appraisal of Real Estate” Canadian Edition Text. It states:
“Market value is inherently a simple concept – it is the objective value created by the collective patterns of the market…”.
Both definitions contain the following assumptions:
- sufficient exposure time in the market
- neither buyer or seller are under any undue pressure
- both buyer and seller are well informed
- payment for the property is typical for the market.
Difference between “Market Value” and “Sale Price”
It’s important to distinguish between the “market value” and “sale price” of a property.
- Market value is a range of probable selling prices, not a specific price. If the market is reasonably competitive, prices can be strong evidence of market value. Market value is the value created by the collective actions of the market.
- Sale price is the amount a particular purchaser agrees to pay and a particular seller agrees to accept under the circumstances surrounding their transaction. Sale price is a historical fact.
Property assessment for taxation purposes is NOT a site specific estimate of value for your property. When preparing assessments, Assessor’s must meet the requirements of the MGA, Regulations, and the Minister’s Guidelines for each property class and use. The Regulations require an Assessor to employ mass appraisal techniques when preparing assessments – meaning the valid sales of similar properties must be used to measure market conditions and prepare assessments. Mass appraisal is defined by Regulation as: “… the process of preparing assessments for a group of properties using standard methods and common data and allowing for statistical testing.”
For example, if your property is a vacant Hamlet residential lot (used for residential purposes), and other residential lots in the same Hamlet of a similar size are selling in the range of $25,000 to $30,000 you could expect your lot to have an assessed value in that range. The assessment could be $27,500 for instance.
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