Barrie Clulow

Supporters of full market value assessment (Current Value Assessment or CVA as it's now called) would have you believe that the value on your assessment notice represents the market value of your property as of a given date, currently January 1st 2008 for taxation in 2009.

If they were to study the assessment process they would find this may not be so as a single formula or assessment "model" as it is called by the assessment world is used to determine the value of all properties in a given area or neighbourhood.

The multiple regressional analysis (MRA) process utilized by the assessment department requires large numbers of sales to accurately predict values. While the process is capable of producing quality assessed values in municipalities where the housing stock is primarily all new subdivision homes it starts to fail in rural municipalities (such as Georgina and Uxbridge) where the housing stock is very mixed. A major reason for the failure is the small amount of sales available to analyze.

The Process

The assessment process is broken down into a series of tasks. To better understand the assessment process one needs to walk in the shoes of the local Assessor.

The Assessor checks the site and verifies the lot size and locations as well as topography and neighborhood information. He takes exterior dimensions of all the structures and draws a diagram showing the dimensions (for later use in sq. ft. calculations)

Inadvertent errors can be costly to the taxpayer

In a new subdivision the assessor may only measure one home of each model being built. I have seen where this meant that a homeowner was paying taxes based on a finished room over the garage that did not exist in his home but did in the model measured.

While inspecting the exterior and interior he will note the quality of construction and materials as well as any additional information required such as: basement height, finished area and quality of finished area, number and types of plumbing fixtures, fireplaces, is the property on well and septic, does it have restrictions such as easements or any other factor that would affect the value. The quality designation which can have a substantial impact on the assessed value of your home can vary from assessor to assessor as it represents his or her personal subjective opinion. (there are other steps in the process that "may" also be tainted by personal subjective opinion)

Environmental factors affect assessments

In the past a closed industrial dump led to a reduction for two entire subdivisions during an appeal to the Ontario Municipal Board (OMB) while an appeal based on a hydro corridor was denied by the Assessment Review Board (ARB) and now the information bulletin that came with your assessment notice says that a hydro corridor may affect the assessment.

Improperly classified homes can be costly to the taxpayer

The incorrect classification for an entire subdivision was downgraded during the appeal process because they were misclassified by the original assessor resulting in a savings of approximately 5% for the taxpayer

After using the above information to calculate the replacement cost new (RCN) of your home the assessment department will establish land values by deducting the RCN from the sale price on properties they have determined are valid sales.

The established land values are then subtracted from the valid sales and the remaining information is subjected to analysis using the MRA process. While the goal is to achieve assessments that are within 5%, either way, of actual time adjusted sales, any one who understands the MRA process and how it is applied to assessment knows that your assessment could be too high or to low by as much as 20% from the real world of an actual sale. For example a $300,000 home could have an assessment anywhere from $240,000 and $360,000 and still be considered equitable by the assessment department.

Actual appeals show it can be worse

There is on record where during a hearing here in Ontario an assessor stated that a property that was demonstrated to be high by 40% was fair and equitable.

All this analysis leads to a computerized formula (know as the assessment model) which is then applied to all residential properties in a given area to calculate the assessed values.

Understanding How Your Assessment was determined

If you are interested in understanding the assessment model and how it was applied to your property (in the calculation of your assessment) go to your local Assessment Office (not your municipal or city tax office)and ask for a print out of the MRA. calculation details on your property along with the residential structure enquiry and site enquiry print outs.

While the names of the print outs may have changed the basic information on them will not

The Formula or Assessment Model

The following is taken from an MRA calculation details sheet in Georgina a few years ago. You will find that although they are not exactly the same they will be somewhat similar for property anywhere in Ontario.

The names of the various factors found here may change if different factors are considered in your area but the process will be the same. The value's orf each factor and how they are calculated will also change.

You will find (in dealing with residential properties) it contains the primary values called "INTERCEPT" a basic value assigned to all properties and "N/HBHD" a value adjustment factor up or down for neighborhood factors affecting values in your area.

Next is a list of standard variations "STD VAR" which when multiplied by the established coefficient (established by the MRA process) produces a value that is added or subtracted from the basic value

Sample Variables:

"SAN_SEPT" or septic system, "WTR_WELL" which is water from a private well, SQRT_LSZ or the square root of your actual lot size, "BATHS" a value determined by the number and or possibly quality of bathrooms, "EFFSQFT" the effective age x the square footage, along with another variation would see QU1FLRAR quality adjusted 1st floor area combined with SQREFGSF which is the square root of the effective age times the total area

The application of this information to the data collected on your property will result in the assessed value or CVA .

Stay Tuned --- .

Earlier posts in the series

You and "YOUR" Property Tax Bill -- Is Your Assessment Fair and Equitable
You and "YOUR" Property Tax Bill -- OUCH!!!!!
You and "YOUR" Property Tax Bill -- Your Assessment Notice Is In The Mail
You and "YOUR" Property Tax Bill -- Mill Rate Idiosyncrasy's
You and "YOUR" Property Tax Bill -- Is Current Value Assessment (CVA) A Better Way?
You and "YOUR" Property Tax Bill -- Who Takes The Biggest Bite?

It will be interesting to watch what happens to

"Your" Property Tax Bill

With province wide re-assessment taking place
for your 2009 property tax bill.

Having successfully challenged my own and many other's assessments over the years Both at the ARB and OMB level there are some points you should be aware of.

1. Bear in mind the assessed value you are looking at is not todays value it is a historical value and in reality is a calculated value using regressional analysis not comparables as you would to list or sell a property. Also their valuations can be out by 10% from actual sales and still be considered fair and equitable in fact I have one case history where an assessor said a property that was out by 40% was fair and equitable.

2. In a court of law we are presumed innocent until proven guilty and while it would be nice to think that the assessment department has to prove your assessment is correct (they will do that) in reality you have to prove it is incorrect if you expect to get a reduction. Simply saying it is to high will not get a reduction for you. It is up to you to prove that it should be what you think it should be. They have access to all the data you only have access to a limited number of comparables, do your research well before you get your comparable information from them.

3. While it is sometimes difficult to prove, there are other factor's that affect your assessment that may not have been included in their regressional analysis such as the proximity of a closed industrial dump. As the neighbourhood friendly agent you know what affects values in your area make sure it is considered in the assessment process.

The process they use to calculate assessments works quit well on large areas of homes that are constructed at the same time and are comparable in construction as long as they factored in all the variables that affect the end values.

On the other hand it does not work as well in rural areas. With a wide range of housing types sizes and styles a variety of lot sizes and custom homes it is much harder to accurately estimate these properties with this system.

Stay Tuned --- .

Earlier posts in the series

You and "YOUR" Property Tax Bill -- OUCH!!!!!
You and "YOUR" Property Tax Bill -- Your Assessment Notice Is In The Mail
You and "YOUR" Property Tax Bill -- Mill Rate Idiosyncrasy's
You and "YOUR" Property Tax Bill -- Is Current Value Assessment (CVA) A Better Way?
You and "YOUR" Property Tax Bill -- Who Takes The Biggest Bite?

It will be interesting to watch what happens to

"Your" Property Tax Bill

With province wide re-assessment taking place
for your 2009 property tax bill.

FSBO site operators must be going through difficult times as they are resorting to marketing hype that should cause one to question everything they say.

In a recent post one FSBO operator claimed that the true commission you pay on a sale of your home could be as high as 60% or even 90% not 6% or less. Their rational is that you are really only paying commission on your equity.

That is like saying the GST and PST paid on your purchase is really double to who knows what on anything you purchase because the person selling the product only has so much equity in the product being sold. After all don't most retailers finance their inventory.

Just imagine the savings on that new car you just purchased if you only had to pay GST and PST on the dealers mark up (equity), or the savings on all that new furniture you just bought if you only had to pay the GST and PST on the furniture stores mark up (equity).

Everyone has the right to buy or sell in the manner they choose but for the widest possible exposure you need more than a sign on the lawn and a post on a blog or add in the newspaper.

You need the exposure that only the combined membership of your local real estate board can give You through the various networks and interrelated web sites in addition to a co-operative listing system.

Previous posts

How Did That FSBO Company Arrive At Their FSBO Statistics?

Is 25% of Real Estate in Canada Really Sold Privately?? Update

Is 25% of Real Estate in Canada Really Sold Privately??

Lets Examine Their Formula

Several times recently a FSBO company here on active/rain claimed that 25% of real estate is sold privately, and went on to say you could calculate how many are sold privately, by subtracting the number of solds reported by the Canadian Real Estate Association from the number of transactions registered in the land registry office.

The fact is they are pulling straws from a haystack

Their formula is flawed as it does not take into account the number of homes that are sold by real estate brokers and are not sold through the The Multiple Listing Services offered by the Canadian Real Estate Association and as a former Real Estate Broker they would know that. They also claimed that builders were a portion of the FSBO sales as they do not sell through real estate brokers. Once again the numbers they are using are flawed as some Builders do use Real Estate brokers and Not all of those sales would be recorded by the Canadian Real Estate Association as they are done on an exclusive basis.

Everyone has the right to buy or sell in the manner they choose but for the widest possible exposure you need more than a sign on the lawn and a post on a blog or add in the newspaper.

You need the exposure that only the combined membership of your local real estate board can give You through the various networks and interrelated web sites in addition to a co-operative listing system.

Previous posts on this subject

Is 25% of Real Estate in Canada Really Sold Privately?? Update

Is 25% of Real Estate in Canada Really Sold Privately??

OUCH IS RIGHT!!!

Have you ever noticed when a public official is talking about your money they always break it down to the smallest common denominator they can. Well your new assessment notice is no different if you look down the right hand side of the notice you will see that the average residential assesment will go up by 3.64% in Georgina for your 2009 tax bill calulation.

But what does that really tell you and what would you do if you took a fast glance. 3.64% thats not bad right --- what they are not putting into words is that the average assessed home in Georgina went up from about $220,000 to about $252,000 or a little better than 14.5% with a four year phase in.

But again what does that really tell you. It does not tell you how much your taxes will go up because the mill rate will not be set until after the time comes and goes that you could file an appeal. Since the only way you can ensure that you only pay your fair share of taxes is to ensure your property is assessed properly and that the value is relative to comparable properties not to what you think your home is worth.

How Much More taxes will I have to pay?

The Formula to calculate your taxes is Mill Rate x The Assesased Value = You Property Tax Bill which makes it very difficult in fact almost impossible to determine at this time because the mill rate is not set yet. But to give you and idea if the mill rate remained the same as last year (more on that later) a home assessed at $220,000 prior to the reassessment would pay roughly $3,069.00, after the reassessment the taxes on that home would be approximately $3,515.00 if the reassessment was applied all at once.

Because of the phase in provision the taxes on an avergage home, assuming the mill rate remains the same as it was in 2008, will increase by just under $112.00 a year every year so that during the phase in you would pay an additional $1,116.00 with out the mill rate going up.

What is Likely to happen to the Mill Rate?

While we do not know what will happen we can look to historical mill rates in Georgina to get an idea of what might happen.

Georgina, The school Boards and the Region requires X amount of dollars from Georgina residential taxpayers to pay the residential portion of the bills for the year. They calculate the mill rate by dividing that amount required by the total residential assessment in all of Georgina. This mill rate is then multiplied by your assessment to calculate your taxes.

The last time there was a reassessment was in 2005 for taxes in 2006, at that time the mill rate actually droped by about 8.89%. In order for the average home to pay the exact amount of taxes in 2009 based on the new full new assessment the mill rate would have to drop by about 12.7% if the assessment were not being phased in.

Because the new assesssment is being phased in I suspect that the mill rate this time will remain very close to what it is now perhaps even a little higher. I say this because the average increase in taxes for the last several years is slightly over 4% which is higher than the average assessment increase to be implemented this year.

And of course appeals and reassessments will affect all of the figures used here by the time the Mill Rate is actually set.

THE BOTTOM LINE

Most Gerogina Residents will be paying more property taxes this year, some a lot more.

Stay Tuned --- .

Earlier posts in the series

You and "YOUR" Property Tax Bill -- Your Assessment Notice Is In The Mail
You and "YOUR" Property Tax Bill -- Mill Rate Idiosyncrasy's
You and "YOUR" Property Tax Bill -- Is Current Value Assessment (CVA) A Better Way?
You and "YOUR" Property Tax Bill -- Who Takes The Biggest Bite?

It will be interesting to watch what happens to

"Your" Property Tax Bill

With province wide re-assessment taking place
for your 2009 property tax bill.