Due to the state of the economy, real estate values have been in decline all accross the country. But, when county governments send out appraisers to reassess property values for the purpose of collecting taxes, property owners are finding that the value of their property has increased rather than declined.
What’s going on?
I haven’t seen any mass increase in real estate tax assessments. Most of the time when property is reassessed it has been enough years since the previous assessment that the prior valuation was before the recent real estate bubble, anyway.
Another effect that few people consider is that the real estate taxes are based on the money the government needs to cover its budget. If it takes X dollars to run the budget, and there is a total property valuation in the district of Y, the millage rate will be X/Y. If the property in the district overnight declines in value by half, X doesn’t get any smaller, in fact, it usually increases when a housing bubble bursts.
The millage rate will become X/(Y/2), and you’ll pay the same real estate taxes on a property worth half as much.
How is and how was property in your area assessed?
At one time in a lot of areas property ended up being assessed less than what it’s true value was. some states or counties used a factor. Maybe like a 4 to 1 value. And some times the factor was arbutary set by the county assessor. this may be going on in your area.
I had my property reassed last year. I bought a house at the begining of the year. The assessed value came in at $55,000 more than what I paid for it. I requested thaat the assessed value be adjusted to the purchased price, and it wass granted.
I can only speak for Wisconsin, and only for a tiny portion of that, since it’s possible things are different elsewhere.
But here, the assessed value for tax purposes is intended to be a fair value based on the market; i.e., what an informed buyer would pay an informed seller at the time of the assessment.
The assessment figure is retained in the tax records unchanged from year to year unless a new assessment is done (the property changes hands, remodelled or razed, or a town-wide blanket assessment is ordered).
Every year, the county treasurer calculates the change in value (for one town/village/city at a time) based on the sales in that area. For example, if the total assessed value of properties sold was $1,000,000 and they sold for an aggregate $1,200,000, then the change was +20%. That number is used to multiply all other properties that have not sold to give the “Fair Market Value,” on the theory that the change in some properties affects all the others equally.
A ratio is computed from (total assessment in town) / (total FMV in town), expressed as a percentage. When that percentage gets too far from 100% for too many years, the state forces the town to revalue all properties and we start from scratch again.
If at any time, a property owner feels that his assessment is wrong, he may appeal, and bring any substantiating evidence (private appraisals and recent comparable sales) to the appeals board, which may adjust the assessment for the following year’s taxes. Obviously most people don’t appeal if their assessment is too low, but many appeal (and win) if it is too high.
To address the OP, it’s possible that the property owners are not as aware of the market as the assessors are. It’s also possible that the assessors made a mistake; there’s a lot of value judgement and opinion involved.
Bill’s point here is something often missed. If it takes a million dollars annually to run the county government, 20% of which is raised from property taxes, the county needs to assess taxes sufficient to raise that $200,000. If property values in the area reduce the overall total value of land in the county from $80 million to $45 million, the county still needs to raise that $200,000 and will assess taxes at a rate nearly double the one they used as against the $80 million valuation.
There’s a difference between raising property taxes and raising the assessed value. While it’s possible that some towns are faking the numbers by raising values, I’d like to see a cite for such shenanigans before considering it any type of widespread occurrence. Especially as the dollar values are so high, such a backdoor approach would be fought tooth and nail.
Same here with New York. We’ve grieved our property taxes twice, and will again next year. We went a slightly easy route – after gathering data on recent sales (in NY assessment trails by a year time-wise), we filed our form without a lawyer, agent, or appraiser. The assessor reviewed and verified our numbers and signed a stipulation to the new market value. Taxes went down automatically.
In NYS it’s enmeshed in the law.[sup]*[/sup] Assessed value must be based on fair market value (insert a few technicalities here). While I believe towns can raise their tax rates (which I think are also regulated by the state to a degree, but can’t find a cite at the moment), they can’t arbitrarily raise the assessed value simply to make up a budget shortfall.
[sup]*Somewhat simple PDF. No time to find a better cite, but will if anyone asks. [/sup]
I don’t know what’s going on across the country, but in CA there are provisions for reduction of tax liability due to depreciation in property value.
I successfully appealed and won a reduction of some 55,000 in assessed value. Although that was welcome, it didn’t represent the true reduction in value.
There was nothing more involved than researching the selling prices of similar homes in the area and referencing them on the appeal form.
California had a free ride during the housing bubble. Tax revenues were high and the governmental coffers should have been filled and saved for a rainy day. That wasn’t the case. They spend money faster than a sailor in a Bangkok bar.
You can say that again. The worst part is that they still are.
True. However…
What you are referring to is the mill rate, or the tax rate per thousand dollars of valuation. In Wisconsin, at least, there are state-imposed limits on how much the mill rate can vary from year to year (about 2% now, with many exceptions). So doubling the mill rate would be mathematically possible, but not politically possible.
Another thought along these lines…with our experience, at least until recently, of constantly rising property values, our town chairman thought he would save us some money by deliberately valuing ALL properties in the town high by about 7%, the average amount values usually went up per year. Since it costs the town a lot of money to do a complete reval, he thought he would buy a year’s time with this trick, and it really isn’t unfair to anyone, as all were assessed high by the same amount.
Bad timing…property values aren’t going up right now, and very little has sold recently for near the (artificially inflated) assessed values. If the decline continues, the chairman’s action may actually cost the town, forcing a reval sooner than expected. That’s a really big “if”, but I wonder if he sleeps well at night.
Same here. I was surprised when they just sort of took my word for it and signifcantly reduced my taxes.
I can tell you that in Palm Beach County, FL that the property values and the corresponding tax rates are decreasing drastically. I am paying 1/2 of what I paid three years ago in property taxes.