Appraisal vs. Property Assessment in Manitoba: Why the Numbers Differ

Every Manitoba homeowner receives an assessment notice from their municipality. When the same owner later orders an appraisal for a refinance or an estate, they are often surprised that the two numbers do not match. Sometimes the appraisal is higher, sometimes lower, and the gap can be significant. This article explains what each figure is designed to do and why they so often differ.

What a property assessment is

A property assessment is the value your municipality uses to calculate property taxes. In Winnipeg, the City's assessment department produces it. Outside Winnipeg, assessments are prepared through the provincial assessment system for each municipality. The purpose is fairness in taxation: every property needs a value so that the tax burden can be shared on a consistent basis.

To do that for many thousands of properties, assessors use mass appraisal. They group similar properties, study sales across the area, and build models that estimate value from characteristics such as size, age, location, lot and building type. Those models are tested and refined, but they rely on the information on file. An assessor generally does not walk through your home before each assessment.

Manitoba assessments are also tied to a reference date that is set in advance and used for a full assessment cycle. That means the value on your current notice reflects market conditions as of that reference date, which may be well in the past by the time you are reading it.

What an appraisal is

An appraisal is an individual opinion of a single property's market value on a specific date, for a specific purpose. The appraiser inspects the property in person, notes its actual condition and features, and analyses recent comparable sales chosen for that home. The effective date is usually the date of inspection, so the value reflects the current market. For estates or family law matters, the appraiser may be asked to value the property as of a specific past date instead.

Why the two numbers differ

Timing

The most common reason is the date. If the market has risen since the assessment reference date, a current appraisal will usually be higher. If it has softened, the appraisal may be lower. In a market that has moved significantly, a gap of this kind is expected.

Condition and updates

Mass appraisal models know your home's size and age, but they usually do not know that the kitchen was renovated last year, that the basement was recently developed, or that the roof and windows are near the end of their lives. An appraiser sees these things and accounts for them. A well-updated older home is often assessed below its market value, while a home in poor condition can be assessed above it.

Features the records do not capture

Assessment records may not reflect a new garage, a finished secondary suite, an addition or a shop on an acreage, especially if work was done without permits. They may also miss negatives, such as foundation movement or a busy location. An appraisal deals with the property as it actually exists.

Different purposes, different methods

Assessment is designed to be consistent across a whole municipality. Appraisal is designed to be accurate for one property. Both can be done well and still produce different results.

Which number matters?

For most private decisions, the appraisal is the figure that counts.

• Mortgage lending. Lenders rely on an appraisal to confirm value. The assessment is not used to set the loan amount.
• Estates. Executors and their accountants generally need a market value as of the date of death. A retrospective appraisal provides that.
• Separation and divorce. Lawyers typically want an independent appraisal for dividing family property.
• Buying and selling. The market sets the price. Buyers rarely pay attention to assessments in active markets, and sellers should not price from one.

The assessment matters for one thing above all: your property taxes. If you believe your assessment is too high, Manitoba municipalities have an appeal process with set deadlines, and the details are printed on your notice.

Can an appraisal help with an assessment appeal?

Sometimes. If you are appealing an assessment, evidence of market value as of the assessment reference date can be relevant. An appraisal for that purpose needs to use that date and the sales around it, not today's market. If you are considering an appeal, check the deadlines and requirements on your notice first, and tell us the purpose when you order so the report is prepared appropriately.

A common example

Consider a 1950s bungalow in an established Winnipeg neighbourhood. The assessment reflects a typical home of that age and size as of the reference date. Since then, the owners have replaced the windows, renovated the kitchen and bathroom, and developed the basement. Prices in the area have also risen. When they refinance, the appraisal comes in well above the assessment. Nothing is wrong with either figure: the assessment describes a typical home at an earlier date, and the appraisal describes this specific home today.

The reverse happens too. An acreage south of the city with an older, unrenovated house may be assessed above what a buyer would pay today, especially if the well, septic system or outbuildings need work. The appraisal reflects those issues; the assessment model may not.

Questions to ask

If you are trying to understand the gap between your assessment and an appraisal, these questions usually explain it:

• What is the reference date on my assessment, and how has the market moved since?
• What has changed about my home since the assessment records were last updated?
• Does the assessment record match my home's actual size, basement and garage?
• Which comparable sales did the appraiser use, and why?

Need a current value?

If you need a current, defensible opinion of value for a sale, mortgage, estate or family law matter, an appraisal is the right tool. Burley Appraisals serves Winnipeg and Southern Manitoba. Order online or call us to discuss what you need.

Frequently asked questions

This article is general information, not legal, tax or financial advice. Speak with a qualified professional about your situation.