Calgary’s municipal authorities perform their annual property assessments in summer, determining the value of privately owned real estate for tax purposes. Citizens receive their documents early in the new year. One thing to keep in mind when going through your assessment is that there’s a difference between the assessment value (or market value) of your home, and its insurance value. Understanding how the two differ is the key to getting a Calgary home insurance policy that fully covers your needs.
Alberta’s Current Real Estate Market
Market conditions play a shaping role in determining the value of a given property at a given time. Alberta is currently in an economic recession, which was largely brought on by the sharp recent decline in oil prices and the accompanying downturn in energy industry activity. However, detached and semi-detached homes haven’t been hit too hard. Most of the price declines were seen in the condo market. On the whole, detached home prices are down about 4.7 percent since the recession began in 2014, while condos have slipped to the tune of 11.3 percent.
The Calgary Real Estate Board (CREB) is predicting that the situation will stabilize in 2017. Forecasters are expecting Alberta to shake off its recession over the course of the year, and real estate prices are likely to begin making a recovery.
Assessment vs. Insurance Appraisals
For your municipal property assessment, city officials look at four main factors:
- Value of the land
- Home construction costs
- Market conditions
- Appreciation/depreciation
A complete list and detailed analysis of all the factors the city uses to determine the value of your property can be found here. To summarize, the key difference between an assessment appraisal and an insurance appraisal is that insurers don’t factor market conditions into their calculations. Speculation drives the real estate market, but insurers don’t consider it when determining the value of a home. Instead, insurers evaluate:
- The amount of money it would cost to reconstruct an identical home
- Site improvement costs, such as landscaping, that would compare to those currently in place
- Demolition fees
In essence, insurance companies are only interested in how much it would cost to demolish the existing structure, remove all the debris, and rebuild an identical or near-identical home on the site. This represents the absolute maximum amount of money they would be responsible for covering if your existing home were to be wiped out by a tragic event, such as a fire.
Many homeowners make the mistake of using their assessment appraisal to determine the value of their home for insurance purposes. This can lead to inflated premiums, since your home’s assessment value may be far higher than its insurance value. It is inexpensive and easy to get an insurance appraisal for your property, and it’s a good way to save some money. This is especially true if you live in a high-demand area of the city where speculation and bidding wars are common elements of the real estate market.
You should also consider the difference between replacement value (RV) and actual cash value (ACV) when shopping for home insurance. Simply put, ACV looks only at the current market value of the insured item, while RV considers the amount of money you would have to spend to replace a damaged or destroyed item with an identical one. ACV coverage is usually less expensive, but it doesn’t offer quite as much protection as RV coverage. RV accounts for appreciation in the value of your home or its contents, while ACV does not.
Comparing and Disputing Your Assessment
It is always a good idea to carefully review your municipal property assessment, since it determines how much you will pay in property taxes. Over-estimations can lead to hundreds or even thousands of dollars in extra taxes. Thus, you should compare your assessment to the listed values of similar properties in your area. You can use this tool from the City of Calgary to do your own comparison.
If you disagree with the assessed value of your home, you can dispute it. Homeowners have until March 6, 2017 to dispute assessments dating back to last summer. Further information is available here.
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