# Property Assessment



## MrBlackhill (Jun 10, 2020)

So we did quite a few renovations and soon we'll have our property assessment by an inspector. Due to COVID, the inspector won't come to our property, but we have to send pictures of everything.

We had asked for a permit but just for a small part of the renovations.

Now, I don't know what's the usual advice here. I guess the goal is to be honest without getting a hike in property tax?

First, I have to separate all the expenses related to what was estimated for the permit.

Next, for the remaining of the renovations, I guess I just add all the expenses for materials only except for some professional services like electricity and plumbing?

I remove every expense for the manpower because if I had done it all by myself I wouldn't had those expenses and they don't add value to the property?

Thanks


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## Mukhang pera (Feb 26, 2016)

I think I'll ask for my property to be re-assessed taking out the manpower component, as you suggest. We paid a lot for the construction labour. But now, come to think of it, we could have spent a few years building it ourselves at no labour cost. The crew that built the house added no value to the property, just an expense. We should be assessed just for the materials. I like that thinking!


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## Money172375 (Jun 29, 2018)

MrBlackhill said:


> So we did quite a few renovations and soon we'll have our property assessment by an inspector. Due to COVID, the inspector won't come to our property, but we have to send pictures of everything.
> 
> We had asked for a permit but just for a small part of the renovations.
> 
> ...


What province?


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## MrBlackhill (Jun 10, 2020)

Money172375 said:


> What province?


Quebec


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## nobleea (Oct 11, 2013)

assessors usually don't care what it cost you to get it done. Just what a comparable property with the additions would be.

We have an unfinished basement. When we get it finished, the city will probably add 40-50K to our home value. Doesn't matter whether it cost us 5K to build on the cheap diy or 100K. It's a market value.

Might be different out there, but that's usually how market based assessments work.


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## Covariance (Oct 20, 2020)

nobleea said:


> assessors usually don't care what it cost you to get it done. Just what a comparable property with the additions would be.
> 
> We have an unfinished basement. When we get it finished, the city will probably add 40-50K to our home value. Doesn't matter whether it cost us 5K to build on the cheap diy or 100K. It's a market value.
> 
> Might be different out there, but that's usually how market based assessments work.


Also our experience here. Market value is land plus building. As replacement cost for the building is far less, they look at what comparable houses (sq ft, bedrooms, bathrooms, finished basement, etc) on the street and neighbourhood go for.


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## off.by.10 (Mar 16, 2014)

nobleea has it right. Just send the pictures and let them do their work. They might ask when was XYZ done, as a buyer would. But not likely how much it cost. At least that was my experience when someone came several years ago.


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## agent99 (Sep 11, 2013)

Unless you added square footage, or some other major improvement like finished basement or garage, the assessed value may not change much. Other improvements that did not require a permit, could perhaps be considered normal maintenance? 

What prompted the need for an assessment? Just the building permit?


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## MrBlackhill (Jun 10, 2020)

agent99 said:


> Unless you added square footage, or some other major improvement like finished basement or garage, the assessed value may not change much. Other improvements that did not require a permit, could perhaps be considered normal maintenance?
> 
> What prompted the need for an assessment? Just the building permit?


Yes, it's normal maintenance, but at a huge cost.

I asked for a permit for $40k due to some structural change (removed a load bearing wall) but the permit was calculated based on the initial quote for the full scope of renovations ($88k) to which I negotiated down to $40k. But in the end, as we decided to do much more and did over $200k renovations on a $635k property (about half of this value is the land value). We fully demolished a whole unit of the duplex and built back from scratch. We only kept the load bearing walls, exception made for one.


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## Mechanic (Oct 29, 2013)

I was thinking of reno's more like maintenance too. I didn't see my property taxes drop because my house got older and things were dated ? I reno'd 3 bathrooms in my last place, including some nice upgrades. Did lots of other upgrades over the years I lived there too. Mostly DIY, so I think the only time I needed a permit was when I had a gas fireplace installed and gas line ran by the installers. I didn't think I needed permits if I was just taking out fixtures and flooring and replacing them etc.


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## MrBlackhill (Jun 10, 2020)

Mechanic said:


> I was thinking of reno's more like maintenance too. I didn't see my property taxes drop because my house got older and things were dated ? I reno'd 3 bathrooms in my last place, including some nice upgrades. Did lots of other upgrades over the years I lived there too. Mostly DIY, so I think the only time I needed a permit was when I had a gas fireplace installed and gas line ran by the installers. I didn't think I needed permits if I was just taking out fixtures and flooring and replacing them etc.


I tried to avoid the permit but due to structural changes by removing a load bearing wall, I needed the permit. My contractors wouldn't do it without the permit because it needed calculations of the load.


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## MrBlackhill (Jun 10, 2020)

This is the kind of renovations we did.


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## AltaRed (Jun 8, 2009)

I agree changes in MVA have essentially nothing to do with actual money spent. It is to the degree improvements were made at a more macro level, i.e. what would a reasonable buyer offer to purchase the property before/after upgrades.

Routine maintenance and replacements are not going to change MVA in any identifiable way, e.g. replacing a 25 year old 78% efficiency furnace with a new high efficiency furnace may attract a buyer to pay $2k more for a house, but mostly it just helps to motivate a buyer.

A 'gut and replace' on the other hand will definitely cause MVA to increase, and partly because other improvements are often made at the time in terms of electrical, plumbing, and HVAC. Most of those will require new gas and electrical permits.

I just had to replace an electrical sub-panel to add a 50 amp circuit for a new hot tub. That required an electrical permit but that should not change the MVA on the property since a hot tub is not a permanent fixture.


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## agent99 (Sep 11, 2013)

MrBlackhill said:


> Yes, it's normal maintenance, but at a huge cost.


It is clear that you did more than normal maintenance! 

Does Quebec use market value for property taxes? If so, they will no doubt consider that you have increased the market value compared with how it was. But what is important, is how it now compares with similar homes in same neighborhood of similar size and age. That assessment would include the land. 

Funnily enough, our market value was reduced last time around! Our home is quite old, but has been continuously improved. It must be that homes of similar age in our area must have been sold for low prices. Probably won't happen next time around!

I would think your insurance company might want a re-assessment. That would cover replacement cost of just the building and contents of the renovated structure.

If this is a rental property, you might want an assessment yourself that includes ALL the money you have put into it so as to reduce any future capital gains.


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## MrBlackhill (Jun 10, 2020)

agent99 said:


> If this is a rental property, you might want an assessment yourself that includes ALL the money you have put into it so as to reduce any future capital gains.


Yes, I'm not sure how this works when I'll sell. Half of the property is rented (I live in one unit and I rent the other unit). I guess that when I sell I subtract all the maintenance and renovations expenses I had over the years from the selling price to reduce the capital gains? (Only the expenses applicable for the rented part of the property)


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## Spudd (Oct 11, 2011)

You can subtract maintenance expenses as you go. Only capital expenses need to be saved for the end.


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## agent99 (Sep 11, 2013)

Spudd said:


> You can subtract maintenance expenses as you go. Only capital expenses need to be saved for the end.


There are others here that know more about this than I do. Maybe they can chip in.

Firstly: This has nothing to do with the market value or your appraisal 

If you buy, say a fixer-upper duplex for $200k with intent of renting one side. So if both sides are equal value, one side cost you $100k. Then you renovate the rental side to bring it up to standard needed for rental. Renovation expense would be a capital expense. You would need to document the expenses and keep all the backup invoices (plus any hours you put in personally at some rate? **. If the total expenses amount to say $50k, your cost for rental side once renovation is complete is $150k. If you sell down the road at say $200k for each side, then your capital gain on the rental side will be $50k instead of $100k. Just how exactly you should document that for future tax purposes is something the real estate experts here can hopefully help with!

As Spudd said, you can deduct regular maintenance costs as you go. Choice of what is maintenance and what is renovation can be a bit fuzzy once the initial capital upgrade is complete. Likely better to charge expenses as maintenance IF you can justify it.

** As I understand it, you can't claim personal hours spent fixing things as a maintenance expense. But not so sure about when doing the initial renovation - seems to me that if you reduce cost by doing some work yourself, you should be able to include your hours.


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## off.by.10 (Mar 16, 2014)

Mechanic said:


> I was thinking of reno's more like maintenance too. I didn't see my property taxes drop because my house got older and things were dated ?


I did, once or twice. Once I think it was because houses gained value more quickly in other parts of the city so the tax rate was lowered more than my value increased. I also had my value go down $5k in one of the 3 year cycles. I think that might have been after the actual visit for an assessment. I do the important maintenance (roof, windows, etc) but the floors and kitchen are all original. 

When I inquired about permits for a bathroom, I was told none were needed for renos under $5k. I guess they basically want to know if you're adding significant value to the house. Also if you might be running afoul of some regulations (eg. changing the size of a window needs a permit, adding a shed needs a permit, etc).


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## AlwaysLearning (Dec 8, 2017)

Slightly off topic but as I received my tax assessment yesterday I thought I'd ask. My home's assessed value is from 2016 It was to be reassessed in 2021 but it not being done (likely due to COVID). The assessed value is about half the price of comparable homes right now.. Some of that is due to a huge run up in real estate prices and part is that it was under valued in 2016 to begin with. (I bought in 2016 for more than the assessed tax value and had an assessment by the bank for our HELOC aligned to purchase price).

Just wondering based on others experience am I likely to see a 100% increase in taxes once a reassessment is done due to the current value being over 2X the MPAC value?

AlwaysLearning


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## Spudd (Oct 11, 2011)

AlwaysLearning said:


> Just wondering based on others experience am I likely to see a 100% increase in taxes once a reassessment is done due to the current value being over 2X the MPAC value?


No, probably not. It depends on what other properties in your town are valued at. The town sets a "mill rate", which is the percentage of your property's value charged as tax, that based on the sum of all the values in town will provide them with sufficient budget. So basically, if the town's costs remain the same year over year, and all the properties in the town double in value, your tax rate will halve. In reality some properties go up faster than others, and so forth. But in general, rising real estate prices don't mean higher taxes.


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## Money172375 (Jun 29, 2018)

AlwaysLearning said:


> Slightly off topic but as I received my tax assessment yesterday I thought I'd ask. My home's assessed value is from 2016 It was to be reassessed in 2021 but it not being done (likely due to COVID). The assessed value is about half the price of comparable homes right now.. Some of that is due to a huge run up in real estate prices and part is that it was under valued in 2016 to begin with. (I bought in 2016 for more than the assessed tax value and had an assessment by the bank for our HELOC aligned to purchase price).
> 
> Just wondering based on others experience am I likely to see a 100% increase in taxes once a reassessment is done due to the current value being over 2X the MPAC value?
> 
> AlwaysLearning


Are you in Ontario? Go to aboutmyproperty.ca to see what your neighbours are assessed at. Don’t look at recent sale prices. The 2020 assessment was postponed due to covid. 2021 assessments will be the same as 2020 unless you’ve done something to your home that mpac is aware of.

eventually your assessment will go up to reflect the real estate boom, but the tax (mill) rate will go down.


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## MrBlackhill (Jun 10, 2020)

So, we recieved our property assessment for 2023-2024-2025.

It's 40% higher than the previous assessment.

What does it mean?

Real estate is not expected to crash too much?
They are locking in high assessments before the crash for high taxes purposes?
Get ready to get hit by the next tax bill?
To do date of the assessment, I should be able to sell somewhere around that price? (I'm not planning to sell)
The photos I've sent about the renovations were factored in?


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## nathan79 (Feb 21, 2011)

I don't know about Quebec, but BC assessments are based on values 12 months ago. Your assessment for July 1st, 2022 is based on the estimated value on July 1st, 2021.

Next year's assessments will likely be higher because they will be based on July 1st, 2022 values. The market peak around here wasn't until February 2022, so values on July 1st were still generally higher than last year's assessments.

As we're likely to be in a protracted RE downturn, assessments will have little actual bearing on RE prices going forward.


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## MrBlackhill (Jun 10, 2020)

nathan79 said:


> I don't know about Quebec, but BC assessments are based on values 12 months ago. Your assessment for July 1st, 2022 is based on the estimated value on July 1st, 2021.
> 
> Next year's assessments will likely be higher because they will be based on July 1st, 2022 values. The market peak around here wasn't until February 2022, so values on July 1st were still generally higher than last year's assessments.
> 
> As we're likely to be in a protracted RE downturn, assessments will have little actual bearing on RE prices going forward.


In Montreal, the property assessment is done once every 3 years.

But, yes, you are right, I've just searched for information and it is based on market value as of July 1st of last year, therefore July 1st, 2021 in this case. And that'll be the value used for tax calculation during the next 3 years.

My taxes should increase only if the increase in value of my property is higher than the average increase.


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## Eclectic21 (Jun 25, 2021)

nathan79 said:


> ... As we're likely to be in a protracted RE downturn, assessments will have little actual bearing on RE prices going forward.


Is there a direct connection between assessments and what RE prices?

In Ontario, my experience is that the assessment is a lagging indicator of long term trends with no influence on prices.


Cheers


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## MrBlackhill (Jun 10, 2020)

Anywhere we can find stats comparing historical market sell price vs assessment value?


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## prisoner24601 (May 27, 2018)

MrBlackhill said:


> Anywhere we can find stats comparing historical market sell price vs assessment value?


Check your Assessment authorities annual report. There are standards they have to achieve related to accuracy and uniformity of the assessed value to market sales price ratio. For example, here is the summary for Nova Scotia and the annual report has the detail by municipality which is quite interesting.






Testing for Accuracy and Uniformity | Property Valuation Services Corporation


We rigorously test the accuracy and uniformity of assessments every year in compliance with the




www.pvsc.ca




.


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## Eclectic21 (Jun 25, 2021)

MrBlackhill said:


> Anywhere we can find stats comparing historical market sell price vs assessment value?


I suspect you'll need to look at your province's method and see what they report as well as track.

Ontario's system uses a mass appraisal that is described as valuing a group of properties as of a given date, using common data, standardized methods and statistical testing. Sales and property information of open market transactions for a set area are analysed and applied to the property.

A note highlights that the assessment is an informed opinion based on the sales made in that area. The sale price can vary substantially. There are all the usual seller, buy and market factors. Assessments are to be done province wide, every four years but the delay due to covid means the 2016 assessment is still in use.


As I say, what I've seen is a lag with a lot of variation from what homes have sold for. The sales data is driving the change in value, on a delayed basis ... which may not mean much when one is selling.


Cheers


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## nathan79 (Feb 21, 2011)

Eclectic21 said:


> Is there a direct connection between assessments and what RE prices?
> 
> In Ontario, my experience is that the assessment is a lagging indicator of long term trends with no influence on prices.
> 
> ...


In BC, it's considered a baseline for what a house is worth, but most sellers always try to get more. A house priced below assessed value is considered to be a motivated seller. Realtors will say "Priced below assessed value!!!" to suggest a house is a bargain.


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