Many people often attempt to compare the cities tax assessment with the current market value of a property. However, typically in Calgary, the tax assessment value and the market value of a property are rarely the same. Following is an explanation on the differences between the city tax assessment and the market value of your home.
What is market value
The definition of market value is the most probable price a property would sell for on the open market. The asking price is determined by comparing 2 to 4 other similar properties that sold most recently. Next, many different factors, such as location, layout and upgrades are compared, each with a particular value and adjusted accordingly. In addition, realtors also look at how the property is maintained, if the current market is a buyer’s or a seller’s market and what the competition is like at the moment of selling. Overall, a market evaluation is very property specific and related to many current economic factors. For a thorough explanation of how a realtor determines the market value of a home, read this article about how to find your home value.
How the city assesses a property
The city of Calgary assesses every property for the purpose of taxation, not for selling. These assessments are purely for the purpose of distributing a fair and equitable taxation. To determine the value of a home, the city uses several appraisal techniques.
Sinkhole in Killarney, Calgary, June 2024. Property taxes fund roads in Calgary amongst other things.
However, the most common approach is the sales comparison method. In this sales comparison method, the city uses the data of sales of similar properties. The sale data that the city uses is from July 1 of the year prior. In other words, no current data is used. It is known that, in Calgary, property values can fluctuate due to economic factors such as oil prices, employment rates and interest rates. Further, it is worth mentioning that the pandemic also had an influence on property values.
Mass evaluation
Besides older sale data, the city also applies a mass evaluation. This means that many homes that are somewhat similar are grouped together into the assessment. However, even if a detached home is compared to a detached home, no home is the same. And comparing homes with hundreds of others is not always appropriate, especially for the less conventional homes.
Characteristics per property
The city attempts to compare similar homes but still aims to check for specific details per property. Therefore, the city does look at location, age, lot size and improvements. For example, regarding location, the city checks if the home is located on a higher traffic location or whether it is near a green space or park. Also, the parking situation of a property is a site factor the city takes into consideration. A regular basement versus a walk out basement is another consideration. Even the views from a property are assessed, and a view of downtown Calgary or the Rocky Mountains is a factor. Besides these particular features of a home, the city also takes any renovations into consideration.
How the city collects data
The city of Calgary collects data via several avenues. The MLS, the Multiple Listing Service used by Realtors, gives all sales data and many details on properties. The Land Title Office shares sales data with the city, as well. Furthermore, permit applications indicate when, for example, an addition was made to the house, a basement was developed, or a legal suite was created. Furthermore, the city may send out mailings to homeowners or conduct physical inspections. And someone who fights the assessment and goes to a hearing provides the city information for future use.
Sale value vs tax assessment value in a nutshell
Property taxes support services like garbage collection
In a nutshell, a realtor uses the most current sales data, whereas the city uses old data prior to July 1 of the previous year. A realtor also takes the current market conditions into consideration. Realtors use 2 to 4 of the most similar properties to compare a home with before selling. In contrast, the city uses a mass method of hundreds of homes to compare. And a realtor is much more detailed on the condition, the state and saleability of a home. Another reason why the city assessment can differ from the market value is when the city is not informed about any improvements or developments on a home. For example, the basement development may not be known to the city, and therefore it is not taken into consideration.
The income method and the cost approach
Besides the sale comparison approach, the City of Calgary uses two more methods, but they are much less common. One is the income method for income properties. These properties are usually bought and sold based on the (rental) income they generate. The second method is the ‘cost approach’. This one is based on the assumption of cost: land value, plus the depreciated replacement cost of the improvement.
How to fight your city assessment
The Assessment Review Board, the ARB of the city of Calgary, mails the tax assessments out in January of each year. Following this is a 60-day review period for the homeowners. In those 60 days, one can speak with a city assessor about the assessed value. The assessor can agree or disagree with the arguments. In the case of a disagreement, one can file an official complaint with the ARB. A formal complaint must be filed and does include a fee.
It is important that the complaint is valid. This means that one needs to gather enough valid proof why the assessed value is too high.
A hearing at the City of Calgary
The hearing is a tribunal-like setting. Three members of the ARB sit behind the bench. A city assessor and the homeowner as the complainant are placed opposite. The homeowner may present the case with evidence first. This is followed by the city’s assessor who presents the case in a similar fashion. After both estimations the panel may ask questions for more clarification. Any decision regarding the tax assessment is made behind closed doors and sent to both parties, the city and the homeowner.
Property taxes support Calgary’s transit
Your personal tax assessment explained
The city of Calgary offers homeowners a portal to check on all necessary details regarding your tax assessment. To log in, you will need the access code on your assessment notice. Visit Calgary’s Assessment Resource.
For a thorough explanation on anything related to the tax assessment, visit the website from the City of Calgary. The procedure is very clear, and the city does a great job explaining and informing the public about property tax assessments.
Your property taxes support services like police, fire protection, garbage collection, transit, parks, recreation, social services and more. Read more about Calgary’s tax break down.
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All sold data, including home features, number of days on the market and the ratio list price vs selling price. Sold data is a great way to understand the real estate market in your community.
It lists all sold data, including home features, number of days on the market and the ratio list price vs selling price. Sold data is a great way to understand the real estate market in your community.
Sample of a tax bill from the City of Calgary. Taken from the City of Calgary website.