Assessment Procedures for Effect of an Individual Property's Sale Price on its Assessment


To explain the MPAC's policies respecting the role of a property’s sale price in the determination of a property’s assessment. 

The Process

It is well recognized in the assessment and appraisal community that a property can sell at any point within a range of values, and that one sale does not necessarily determine market value.

However, MPAC recognizes that a sale price of a property is evidence of great weight in determining a property’s market value. The challenge is determining when it is appropriate to use the actual sale price and when there are good reasons to conclude that a sale price does not reflect market value.

The following guidelines identify some of the more common reasons that would justify a deviation from the sale price.

The sale did not occur on the valuation date

The Assessment Act requires that MPAC determine a market value estimate as of a specific valuation date (e.g., January 1, 2012 for taxation years 2013 to 2016 and January 1, 2016 for taxation years 2017 to 2020). Sales that occur a month or more before or after the valuation date must be time adjusted to account for any escalation or decline in the real estate market. Time adjustments are based on analysis of other sales in the same market area. The assessor will also review when the sale price was negotiated.  When a sale is registered some months after the price was negotiated (e.g., new construction and condominiums), the sale price may not be reflective of the market value at the time of registration. 

The sale is not an open market transaction

Sales must be open market transactions in order to be relevant for market analysis.  There may be evidence that the sale was not an arms-length transaction between willing and knowledgeable buyers and sellers.  The following types of sales are not generally accepted as the best indicator of the assessed value:

  • the sale was between related parties (e.g., family sales, parent and subsidiary companies);
  • the sale was compelled (e.g., mortgage foreclosure, power of sale);
  • sales under duress or forced (e.g., family break-up, estate sale, expropriation, tax sales);
  • builder/developer sales;
  • quit claim, clearing of a title;
  • speculative sale;
  • sales involving non-typical financing;
  • sale of partial interest in the property; and/or
  • sales involving chattels, crops and goodwill.

A change to property takes place after the sale

The assessor’s investigation will include a determination of whether the sale was an open-market transaction and the condition of the property at the time of sale. Where physical changes occurred after the sale, the actual transaction price no longer represents the value of the property in its current state.

The sale price is not typical, but within the range of value

Buyers and sellers are motivated for different reasons that affect how much they are willing to pay.  For example, some buyers are motivated because they want to live on a particular street, close to a preferred school, or they may like a certain feature of a house and are willing to pay more than someone else for the same property.  Similarly, prices can be influenced by:

  • the supply and demand for properties in a neighbourhood at the time of listing;
  • the negotiating skills of either party;
  • the financial circumstances of either party; and
  • the length of time on the market.

These are still open market transactions, but the motivations of the buyers and sellers result in a range of values within which a property may sell.

For example, in a townhouse or a condominium complex, there can be several units of exactly the same model; while the resale prices for these models are rarely the same, they will usually sell within a range of value, based on previous sales.

One ‘Model A’ could sell for more or less than another ‘Model A’ because of the motivations of the parties and the particular circumstances surrounding the sale. If the time adjusted sales amounts indicated that the range of value for these townhouses or condos was $155,000 to $175,000,  all ‘Model As’ might be assessed at about $165,000 because that is the most probable selling price.  Assessing one property at the top of the range of value and another at the bottom of the range of value because of the price paid for the individual property, results in inequitable treatment. Therefore, MPAC assesses all the like ‘Model As’ at the most probable selling price, i.e., at or near the mid-point of the range of market value. 

There will also be times when it is not as obvious as in the townhouse example cited above that the sale price is either within or outside an anticipated range of value based on previous sales. Upon inspection and investigation of the property and similar properties that sold in the same time frame, the assessor may find that the sale price is the best indicator of market value for the property, even though MPAC’s analysis predicted an alternate value.  This is especially true in areas where properties are not very similar, or where the number of sales available during the analysis period was limited.

The sale price does not reflect the unencumbered fee simple

The Assessment Act requires that the assessed value be established at “the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer.”

The term “fee simple” means an ownership interest in land that is the broadest property interest allowed by law.

There may be evidence of circumstances affecting the sale price so that the price does not reflect the current value of the unencumbered fee simple.  Such circumstances may include:

  • when the sale does not include all the interests in the land;
  • leases or other transaction terms that do not reflect the current market; or
  • lack of exposure of the property to the market.

If any of these circumstances apply, the sale price is not appropriate to use as the assessed value.

Related Information

Assessment Act

Note: This procedure has been developed to provide the public with a general understanding of the assessment process for the affect of an individual's property's sale price on its assessment. The applicable law prevails to the extent there is any conflict between the procedure and the relevant law.

Note: The applicable law prevails to the extent there is any conflict between this information and the current law. This information is not intended to provide legal advice and should not be relied upon as such.