tax assessment

raforMay 31, 2011

This isn't really about buying or selling, but I hope someone can give me some insight.

We bought a house last year. The owners had it on the market for over a year. Price started at 399,000. When we saw it, they had accepted a contingency offer of 299,000. So we offered 275,00 with no contingencies and then found out the bank was involved (sort of a short sale I guess). Owners accepted and then we started haggling with the bank and settled at 285,000. So now to my question:

Purchased and moved in and in the spring received a tax bill with an assessment of 314,000. I understand that the town doesn't redo taxes except every 2 years. So fine. Well this year's tax bill arrived and the assessment went up. If the market showed that the price was reasonable at 285,000 (and real estate certainly hasn't gone up in this area since, it's gone down!) why the increase rather than a substantial decrease?

Anyone ever challenge an assessment and have any advice on how I should go about this?

Thanks in advance for any help.

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Good luck fighting city hall ... we bought mid-December 2004 @ $270,000 for a house that had been over-priced & sitting empty for 6 months (to me, that means we paid fair market value). January 2005, we get our tax assessment for $300,000. Apparently, any difference of 10% is acceptable to them, and that inflation of our home value for property tax purposes (now = $340,000) is standard practice.

    Bookmark   May 31, 2011 at 7:48AM
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Since it's a recent sale, you should have a case for lowering it by taking your closing papers to the protest hearing. They should lower the assessment value to what you paid. THAT was/is fair market value.

    Bookmark   May 31, 2011 at 8:30AM
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Caulk King is right, since its a recent sale, your contract with the purchase price should be enough. If it isnt, finding three comparable sales within the last 6 months and presenting them to your assessors office should get your assessment lowered. In my area, grievances have to be filed by May 1st. (you would have to get the paperwork from your town to file) If thats the same in your area, you will have to wait until next year.

    Bookmark   May 31, 2011 at 9:13AM
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Appeal the valuation. Some relief is typically granted.

    Bookmark   May 31, 2011 at 10:25AM
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I have appealed my tax assessment twice and won both times. The fist was a case like yours, where my assessed "real market value" was higher than I had recently paid for the home. Contact your county assessors office to find out what their procedure is for appealing your assessment.

    Bookmark   May 31, 2011 at 11:56AM
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We regularly appealed and won for the thirty years we lived in our former home. Almost any appeal with get you a tiny reduction, but you need to carry it all the way to get a meaningful reduction. In Cook County, IL it's a two-stage process -- maybe simpler for you!

Seems to me you have an iron-clad *proof* -- your purchase price. (Our wonderful comp was a neighbor's identical house that was UNDER-assessed because he had 'clout'.)

    Bookmark   May 31, 2011 at 12:13PM
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Depending on the method the assessor uses your actual price may get averaged into a group and you can still end up higher.

Would you sell for the price you paid right now?

If the answer is no, the assessment is low.
If you would sell for that price the assessment is correct or high.

    Bookmark   May 31, 2011 at 3:42PM
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brickeye: yes I would sell for that price.

I remember a few years back when housing prices were soaring. I had a house that I had bought 20 years earlier for 157,000. Back at the height it was "worth" 500-600,000. I was considering downsizing so I went out with a friend who is a realtor to look at homes in the 200-250,000 range. She would show me something and I would say "This isn't worth 250,000." She said I had to stop thinking like that!! Turns out I was right and they weren't worth that. But then again, I wouldn't have paid 500,000 for the house I had paid 157,000 for 20 years earlier. It was never a 500,000 house!

So I think we made a fair deal on the current house, but I think local governments are trying to keep money any way they can and haven't readjusted their thinking to take into account a downturn in real estate. After all, real estate was like the stock market: it only goes up, never down :)

    Bookmark   May 31, 2011 at 9:29PM
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Keep in mind that a tax assessment number, even one supposedly set at "full valuation or market value", isn't done to set sales prices, or even truly related to it.

The point of any assessment figure is to fairly rate the value of one house to generally similar others for the purpose of balancing the taxes paid by each relative to the others.

You could have an assessment value of $13,247,236,758 and it would be perfectly correct if all other similar structures within your taxing jurisdiction had roughly the same assessed value.

To properly grieve your assessment the key is to compare your house's valuation with other similar houses. If that's out of whack, then you have a case.

Now, in some taxing jurisdictions purchase price and/or sale date has a stronger effect (CA is one state like this, IIRC), resulting in long-held properties having much, much lower assessed values. But your comment about the town re-doing the taxes every two years leads me to believe you're not in a state that leaves old assessments in place until resale.

However, in both cases (i.e. whether there is town-wide periodic review or where values are only adjusted at resale) the principle is still the same: the assessment figures among all similar houses (or similar and resold within the same period if that's the criterion) should be the same.

Historically towns have deliberately linked rising assessments to rising home values creating a spurious belief that the taxes should be the same as the purchase price. This was probably done to confuse (and soothe) irate taxpayers, and is now coming back to bite towns in their municipal butts as people with declining home values protest their assessments. Even in a down market (when describing purchase price), a higher-than-probable-sale-price assessment can still be correct as long as all similar properties within the same taxing district stay the same relative to one another.

In fact purchase prices are not particularly useful assessment-setting tools since many have eccentric components (ill-informed or particularly desperate buyers and sellers, shared closing costs, repair allowances, extra furniture that is conveyed, just to name a few).

The only things that properly belong in the assessment calculations are fairly fixed things like size, age, location, # baths, amenities like pools and fireplaces, and in some farily extreme cases, condition, etc. While these are also commonly factors in sale prices, it doesn't mean that all sale prices accurately predict tax assessments.

HTH, and good luck,


    Bookmark   June 1, 2011 at 2:29AM
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I think it would be helpful to know if the home was ever designated as a short sale or preforeclosure, REO, or whatever distressed designation your tax assessor might use. Here, those are designated on the tax record, and trump the purchase price in the same way that an appraiser isn't supposed to use distressed properties to value a home.
Hope that makes sense. Bottom line, if it was a distressed purchase, your tax assessor will assume you paid below valuation.

    Bookmark   June 1, 2011 at 7:13AM
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Years ago when we bought this house the assessment was much higher than what we paid (lakefront home). I appealed to the township and was denied. I then took it to the state tax tribunal, with all my documentation, purchase price, recent comps, etc and won a reduction. It pays to fight city hall!
Kathy G in MI

    Bookmark   June 1, 2011 at 9:51PM
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C9... the house was not bought below market value... it sat on the market for a year. The house was bought at market value.

    Bookmark   June 2, 2011 at 7:20AM
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NCguy- I guess I didn't make my point. It doesn't matter what it sold for, if it was officially designated as a distressed property on tax records, the assessor doesn't have to take that sales price, above below at market whatever, into consideration, just as an appraiser will normally throw those properties out of the comps. That's here in Pinellas county.
Just thought it would be worth knowing what the policy was for the OPs assessor and whether or not it applies to that property.

    Bookmark   June 3, 2011 at 7:12AM
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We fought our assessment once and won. The assessment was for around the price we paid but I still thought it was too high because I was under the gun to find a house and the seller wouldn't budge on the price so I paid more than I would have if I had time. I challenged the assessment. The county sent an appraiser over. I pointed out to him every single thing that was wrong with the house and told him why I thought it should have been valued for alot less. I did exactly the opposite of what I do when I'm selling a house. My real estate agent gave me a letter stating her opinion that the house was worth less than what I paid. We went to court. The judge wouldn't consider the letter. He said I should have brought the real estate agent herself to give her opinion. He was ready to throw out the case when it suddenly occurred to me that the county didn't call up their appraiser to testify who was sitting right next to them. I stopped the judge and asked him to ask the county's appraiser for his opinion. The county jumped up and objected. They knew what he was going to say. The judge let him come up and he sided with me. He had to tell the truth! I got my assessment lowered. The thing that made me the maddest was when I realized that the appraiser told the county the truth about the value and that's why they didn't call him up and they still fought me in court, hoping they'd win because I didn't know what I was doing. And they almost did!

    Bookmark   June 9, 2011 at 11:16PM
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Well, we just looked at a home that has been on the market for 10 months. It was foreclosed on last year because (according to a neighbor) the owner could no longer deal with the high tax assessment.

Currently there is a termite problem, rat problem,roof problem, mold issue, numerous electrical problems (an extension cord was run through a wall to provide power to one room, for example), about 25% of the square footage is not heated or cooled - therefore not legally "living space", the well currently pumps just over the legal minimum, and the last home inspector to write a report cited 87 violations/failings. The road is unimproved. There are 4 vacant homes on that block, out of 5 families.

The price as of Monday was 88,000. The new tax assessment from this spring? $337,000. And yes, they are aware the property "has issues". They don't care, they just want the money.

    Bookmark   June 14, 2011 at 10:27PM
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What information is considered for a tax assessment and what a homeowner has to show is a matter than varies among different states. Therefore, it isn't much help to know how State X does it if you live in State Y and they do it differently. If you don't want to talk to an attorney in your area it may help to talk to others who might know about your local procedure or post what state you are in. However, an attorney is the best bet for accurate information (although it may not be worth it economically). In some areas there are tax protest companies who will handle your protest with you paying a share of the savings. That might be worthwhile for some people.

    Bookmark   June 16, 2011 at 3:28PM
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