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Mike(don't get addicted) says "I'm willing to pay $88,500 more than market value"

 Back in January,  Mike(don’t get addicted) said

"As for 'city assessed values do not reflect up-to-date market conditions and can’t be relied on to set current market value' I could’t disagree more. We have used Assessed values as a primary pricing agent to determine a houses value. I trust a non-baised (city) source over a baised (CREB) source anyday.

For us, we put offers in no higher than city assessed value, even if the selling realtor has priced it above city value. If the realtor doesn’t like the offer, we walk to the house for sale at or under city assessment.

No one in their right mind should pay more than a house is worth, and that’s city value."

When the new tax assessments came out this year, there was lots of consternation about the low assessments, and some bloggers actually thought the assessment reflected the present value of their homes. I have frequently said on here that comparable sales are the accurate way to price your property.

It's unusual for it to happen this year, as most homes are selling for substantially above the assessed values, but I came across this property in Mike's neighbourhood, Scarboro, which sold for well below assessed value:

March 11, 2010 sale price: $655,000.

City assessment: $743,500

According to Mike's diatribe above, he would have willingly forked over $743,500 for this house.

I repeat: DO NOT price your house according to city assessments.

Posted: Tuesday, March 30, 2010 1:07 PM by Bob Truman

Comments

Bob Truman said:

Let's look at the other side of this coin:

Mike(don’t get addicted) said "If the realtor doesn’t like the offer, we walk to the house for sale at or under city assessment."

First off, it's up to the seller to "like" or dislike" the offfer, not the realtor. With that out of the way, let's take up a collection to buy Mike a new pair of shoes because he's going to wear his out by all the walking he's doing.

Although you can find a few properties priced below assessment, it's rare, and there's usually an extenuating circumstance such as a very poor location.

Three other properties have sold in Scarboro this year, all above assessment. A house assessed at $774,000 sold for $851,000. Would Mike be able to make a case to the seller for letting it go at assessed value? I guess if the seller didn't have a realtor and thought assessed values were the true values. The seller would have lost $77,000, much more than the paltry real estate commission he'd pay in order to get good advice.

# March 30, 2010 2:26 PM

Bob Truman said:

There's a "third" side to this coin, too.

I put together an evaluation yesterday, and one of the recent sales which I used as a comparable sold for about $50,000(12%) less than all the other houses. I knew something was amiss, so I talked to the listing realtor and was informed of the issues, and he agreed with me that it sold for $50,000 less than comparable houses which were in good shape. Let's call this the "stigmatized" house.

You live a few doors down from the stigmatized house. Your house is the same style and size. You've decided to sell your house FSBO(for sale by owner). You see the similar house down the street priced on realtor.ca, and it sells in four days. Since things are really moving, you price your house $10,000 higher and get a quick sale.

You didn't realize the house down the street had serious problems with the flooring and the structure.

You priced your house incorrectly, and sold for $40,000 less than market value. Not only that, the buyer knew you were saving on real estate fees, and negotiated a further $8000 off the price.

By not getting good advice, you just lost $48,000 by saving $16,000 in commissions.

# March 30, 2010 2:40 PM

Bob Truman said:

P.S.

Mike says "even if the selling realtor has priced it above city value."

To set the record straight, it's the seller who sets the price.

# March 30, 2010 3:11 PM
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