What is Market Value?
It's important to define and understand this term in relation to your assessment. The MGA defines market value 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 or seller are well informed
- payment for the property is typical for the market.
Market Value vs. Sale Price
It's important to make a distinction 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.
The Regulations require an Assessor to employ mass appraisal techniques – meaning ALL valid sales of similar properties are to be used to measure market conditions and prepare assessments. When preparing assessments, Assessor's MUST meet the requirements of the MGA, Regulations, and the Minister's Guidelines for each property class.
For example, a Residential property in a Hamlet must meet the standard of market value as determined by the collective sales of similar properties. If the property is a vacant residential lot (used for residential purposes), and other residential lots in the same Hamlet of a similar size are selling in the range of $20,000 to $24,000 you can expect your lot to have an assessment value comparable to that range. The assessment may be $22,000 for instance.
