12.2 Valuation Approaches & The Comparative Market Analysis

Match the work to the purpose

For ordinary market-value municipal assessment, Alberta’s Municipal Government Act section 289 and the Matters Relating to Assessment and Taxation Regulation, 2018 distinguish condition and valuation dates. For a typical 2026 tax assessment, value reflects July 1, 2025, and characteristics and physical condition reflect December 31, 2025. A new sale estimate can use more recent evidence and reflect changed condition. A tax assessment is also distinct from the amount of tax on a bill.

For the property tax estimate, obtain the taxable assessment, assessment class and current rates from the municipal assessment notice, tax bill or municipal office. Apply the rates for that class, including the municipal and education components where applicable. For example, a stipulated taxable assessment of $500,000 and a combined rate of 6.5 mills give $500,000 × 0.0065 = $3,250 before separate charges or adjustments. Use the actual tax bill or certificate to confirm the amount and payment status for a closing adjustment. GST on the sale and federal income tax issues require separate review with the appropriate adviser.

City of Calgary property tax calculation

Alberta’s Real Estate Act section 2(4)(c) exempts estimating value for a trade in real estate by a person holding the real estate broker licence from the Act’s appraiser provisions. Section 17.1 separately requires membership in good standing in one of the named organizations to act or hold oneself out as a real estate appraiser in Alberta. AIC members follow the applicable Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP). The 2026 edition took effect April 1, 2026. Other organizations may have their own applicable standards. If a lender, court or another user needs an appraisal, confirm its requirements and direct the client to a qualified appraiser.

In a written CMA, identify the property and rights considered, client, purpose, date, evidence, range, assumptions, limitations and intended use. Clearly identify it as an estimate for the trade and make the scope and non-appraisal limitations prominent. A disclosure can say that the CMA is for the named client’s pricing decision, gives an estimated range, was prepared as a brokerage service and is unsuitable for reliance as an appraisal or for financing, court, tax or financial reporting. This makes the licensee’s role and product clear under Rules 41–42. Check brokerage policy on how to present the report and discuss what new evidence would change it.

Understand what each valuation approach measures

A typical appraisal defines the property rights, value sought, effective date, purpose and authorized users. The appraiser defines the scope, identifies and verifies the subject and market data, analyzes relevant approaches, reconciles the evidence and reports the conclusion and limitations. A consistent process allows the intended user to understand and evaluate the work.

In the cost approach, reproduction cost estimates a duplicate and replacement cost estimates equivalent utility using current construction assumptions. Estimate land separately. Add the relevant cost new and deduct accrued depreciation supported by evidence. For example, $160,000 in land value plus $350,000 cost new less $45,000 accrued depreciation gives $465,000, with any site improvements already accounted for in the stated inputs. Physical deterioration describes wear or damage. Functional obsolescence reflects an internal shortcoming such as an awkward layout, or a feature beyond what the market supports. External obsolescence reflects outside influences such as a nearby nuisance. Establish whether the market actually discounts the property and whether a cure is feasible and economical before making a deduction.

For direct capitalization, deduct vacancy and collection loss from potential income and deduct relevant operating expenses from effective income. Use a consistent treatment of reserves or other operating items when comparing the subject with the sales used to derive the cap rate. Mortgage principal and interest reflect the owner’s financing and are excluded from property net operating income (NOI). With stabilized annual NOI of $40,000 and a supported cap rate of 6.25%, the indication is $40,000 ÷ 0.0625 = $640,000. Holding NOI constant, a higher cap rate gives a lower indication.

For a rental investment, confirm the permitted use and any approvals or restrictions that affect occupancy or a proposed conversion. Compare local rent, vacancy, supply and demand for similar lawful units. Review taxes, insurance, utilities, maintenance and management for recurring expenses, and estimate large replacements and financing separately in the owner’s cash flow. Check which costs the lease assigns to the tenant. Compare lease rents and remaining terms with current market evidence.

A tenant covenant in an investment comparison concerns the tenant’s lease obligations and the strength of the promise to pay. Check the signed lease and amendments, payment history and arrears, renewal or break rights and any enforceable guarantee through the proper due-diligence channels. Two units advertised at the same rent can have different expected collections or vacancy if one lease is near expiry or the tenant is in arrears. In the example above, if supported stabilized NOI falls to $36,000 and the same cap rate still applies, the indication falls to $576,000. An appraiser may also find market evidence for a different rate if the risk differs. Use assumptions consistent with the evidence and avoid counting the same risk twice.

PSPC income approach guidelines · RICS comparable-evidence standard, Appendix A

A gross rent multiplier uses gross rent instead of net income. If a comparable sold for $360,000 and earns $3,000 per month, its monthly multiplier is 120. At comparable terms and operating characteristics, a subject earning $2,900 per month indicates $348,000 at that multiplier. Use the same rent period and basis throughout and verify rents, tenancy terms and expense differences.

Verify comparable evidence before using it

Begin with the transaction and the interest. A residential purchase, commercial lease and sale of a tenanted mixed-use building require different evidence. For a small shop lease, confirm the proposed activity and the municipality’s current approved use and approval path. Verify usable space, access, loading, service capacity, signage and the expected cost of tenant improvements. Read the proposed rent, operating-cost recoveries, repair allocation, term and renewal rights. For a purchase with existing tenants, add title and registered instruments, leases and amendments, the rent roll, expenses and the site’s prior uses. Review the local market for the particular use and ask an environmental professional whether further assessment is appropriate. For example, a former dry-cleaning location advertised as suitable for a café may warrant separate use, servicing and environmental checks before the client commits. Involve the broker and refer commercial work to a properly authorized and competent licensee if it is outside your sector or expertise.

Calgary commercial use approvals · Alberta environmental site records · PSPC market rent guidelines

Check sale date, consideration, transaction terms, condition, tenure, location, site and reliable measurements. Expand the search thoughtfully when close matches are scarce, and explain why a comparable from a different period or area is still useful. A verified arm’s-length sale is direct evidence of an agreed price. Active listings show competition and asking terms. Pending listings show activity but may not supply a verified final price. Expired or withdrawn listings can prompt questions about exposure, terms or pricing. Their status alone does not establish a price buyers rejected. Reconcile the strongest indications and communicate a material market change to the client.