If you recently received your new municipal evaluation in the mail, you may be wondering whether your home’s value has increased significantly. The answer is, probably not.
The market value of your property is not necessarily correlated with your home’s municipal evaluation. Market value is determined based on supply and demand – which is constantly in flux – while the evaluation is a figure calculated by the city.
Generally speaking, your home’s market value will be greater than its municipal evaluation. This is because the city typically does not move as fast as the market. For this latest evaluation, the city raised the numbers significantly in order to catch up to COVID pricing and the red-hot market.
Now that those figures have been adjusted, for the first time in a long time, we’re actually going to see properties selling for less than their municipal evaluation. Now, this happens every so often: the city increases their evaluation and the market takes a little bit more time to catch up. Put simply, the tables turn.
It’s therefore important to understand that these two numbers are not correlated. If your municipal value is $500,000, that won’t help you determine what your home is worth to a buyer. To understand its market value, you would need a real estate broker or chartered appraiser to come in and compare your property to others in your neighborhood with similar characteristics.
Your municipal evaluation, on the other hand, is typically a function of inflation that the city is applying year after year, unless you’ve requested permits to do significant work to the property. In that case, the city will want to reevaluate what your property is worth in light of these improvements, because they want to make sure they’re cashing in on the additional tax revenue. Remember: your municipal taxes are calculated as a direct function of your municipal evaluation.
One last thing to consider is that your welcome tax is calculated based on either the municipal evaluation or the sale price – whichever one is higher. In a market like this, many people will be surprised at the size of their welcome tax bill because they thought they got a great deal on a property, but the valuation was actually higher than what they paid.
Have more questions about your home’s value? Receive a document in the mail and not sure how to decode it? Reach out – we’ve got the answers!