OT: Downsides to a LOWERED tax assessment?

[daker13]

My town recently contracted with a company to do new assessments for property taxes. Most houses in my neighborhood were assessed higher, but ours actually went down in value. I went through the materials from the company, and I strongly suspect the reason was they sought comps based on the style of home I live in, and looked for comps in other neighborhoods. The assessments must have been done from the street (i.e., they didn't actually come inside my home).

Of course I'm happy to pay lower property taxes, but I've made some major improvements to this property (including a very nice bluestone patio last summer) and I don't like the idea of the house losing value. Most people who dispute assessments do so because the town or city values the house too highly, but is there any reason to be concerned about an assessment that's too low? If I were buying, I'd think that would be a good selling point, but the whole thing bothers me.

Thanks for any input.

[Cicli]

Nah,
I bought my house under market value by about 20%. Over the last 8 years I have dont countless improvements including a deck, finishing a 800 square foot basement with a kitchenette and game room, new HVAC system and new windows. It is still 20% under the area. I like it like that. Keeps my taxes down. When it comes time to sell, I get a real assessment and show all the improvements. Let the new owner pay the increased taxes. :banana:
I tried to convince the guy my house was worthless. They weren't going for it.

[bfd]

Wait, you're upset that you have to pay LESS TAXES?! :eek::mad::confused:

You're obviously not living in San Francisco! But think about it, unless you're selling, it really doesn't matter what the "assessed" value is on your property. Enjoy the savings and maybe get a new bike or something! :fight::butt::no:

[dolface]

Our assessment was lowered a couple of years back, and recently we got a letter from the city saying "oops, our bad, you owe us all the taxes we told you not to pay" :eek:

[Ken Robb]

You want to be careful discussing your improvements. I many areas the tax collector/assessor will add value for improvements based on the value shown on building permits. If you did your improvements without paying for permits that may be why you got a lower assessment than expected. If that is the case you may be liable for the missed fees plus penalties.

When you sell the buyer's lender may require copies of permits for any alteration/additions and that could be a trigger for collection of back fees/penalties. I was sometimes able to solve problems for clients w/o permits by getting a survey of compliance. This is where the city inspects the property as though the work had just been done and issues what is essentially a post-dated permit to satisfy lenders. A couple of times we avoided penalties by showing that the work was done by previous owners but the permit fees still had to be paid.

[daker13]

You want to be careful discussing your improvements. I many areas the tax collector/assessor will add value for improvements based on the value shown on building permits. If you did your improvements without paying for permits that may be why you got a lower assessment than expected. If that is the case you may be liable for the missed fees plus penalties.

When you sell the buyer's lender may require copies of permits for any alteration/additions and that could be a trigger for collection of back fees/penalties. I was sometimes able to solve problems for clients w/o permits by getting a survey of compliance. This is where the city inspects the property as though the work had just been done and issues what is essentially a post-dated permit to satisfy lenders. A couple of times we avoided penalties by showing that the work was done by previous owners but the permit fees still had to be paid.

Thanks for your help, Ken. I did get permits when necessary--and sometimes when probably NOT necessary (I found that, if you ask if you need a permit for something, the building inspector ALWAYS says 'yes')--and some of this work isn't completed yet, so that's a possible explanation. I'm generally aware of the issue you're referring to, and the major stuff has been done with permits and inspected. Though IME I've seen data sheets on properties for sale that have been pretty lax on this issue (my mother in law looked at a house where the question of whether the place was heated with oil or gas was answered with 'UNKNOWN' on the info sheet--not likely, in New England). When it comes time to sell, I'm going to be honest, and I know this house inside and out.

Thanks for all the responses, more input is welcome.

[paredown]

Thanks for your help, Ken. I did get permits when necessary--and sometimes when probably NOT necessary (I found that, if you ask if you need a permit for something, the building inspector ALWAYS says 'yes')--and some of this work isn't completed yet, so that's a possible explanation. I'm generally aware of the issue you're referring to, and the major stuff has been done with permits and inspected. Though IME I've seen data sheets on properties for sale that have been pretty lax on this issue (my mother in law looked at a house where the question of whether the place was heated with oil or gas was answered with 'UNKNOWN' on the info sheet--not likely, in New England). When it comes time to sell, I'm going to be honest, and I know this house inside and out.

Thanks for all the responses, more input is welcome.

We're currently managing a property that is for sale.

Because of the terms of the prospective mortgage, everything has to be permitted. When they saw the basement was finished they checked and found no permit, and as a consequence, it triggered a required Licensed Electricial inspection--and of course there were a few things not up to code.

So a good two hours with our electrician and me as the electrician's helper and all the deficiencies were met--but surprisingly there will be a required second electrical inspection--a new one for me.

I'm not sure what mortgage program is involved, but it seemed unusually thorough...

I would be happy with a lowered assessment--the market price will be set by the comps anyways. We've had declining assessments the past couple of years--at the same time that our insurance has been increasing because the replacement cost is going up some 10%/year:mad:

[verticaldoug]

Lower taxes is like manna from heaven


My town recently contracted with a company to do new assessments for property taxes. Most houses in my neighborhood were assessed higher, but ours actually went down in value. I went through the materials from the company, and I strongly suspect the reason was they sought comps based on the style of home I live in, and looked for comps in other neighborhoods. The assessments must have been done from the street (i.e., they didn't actually come inside my home).

Of course I'm happy to pay lower property taxes, but I've made some major improvements to this property (including a very nice bluestone patio last summer) and I don't like the idea of the house losing value. Most people who dispute assessments do so because the town or city values the house too highly, but is there any reason to be concerned about an assessment that's too low? If I were buying, I'd think that would be a good selling point, but the whole thing bothers me.

Thanks for any input.

[Ken Robb]

Thanks for your help, Ken. I did get permits when necessary--and sometimes when probably NOT necessary (I found that, if you ask if you need a permit for something, the building inspector ALWAYS says 'yes')--and some of this work isn't completed yet, so that's a possible explanation.

Thanks for all the responses, more input is welcome.

In my area taxes are not adjusted for permitted work until the final inspection and filing of the notice of completion of all work. Your area may do the same so you may get a little bump. OTOH not ALL permitted work increases assessments. A room addition always bumps it up while a new water heater never does. A roof replacement usually has no effect. These are maintenance projects not improvements as far as the Assessor is concerned. New kitchens or baths are somewhat debatable. If no walls are moved I think the project would be considered maintenance but opening up walls/combining rooms MIGHT have an effect. I saw a couple of cases where owners, just to be safe, waited until after final inspection before taking out walls to form a "great room" instead of the original LR,DR, Kitchen.

[carpediemracing]

Lower assessment, if it's substantial, can affect the ability to refi the property. We got hit with that, our house devalued 20% so our initial downpayment basically turned worthless.

Also lower assessment doesn't mean lower taxes if the mill rate goes up. Our taxes went up at the same time our house devalued.

[unterhausen]

I have a current interest in this question.

my mother passed away last year, and I finally put the house on the market a month ago. My sister got the tax assessment reduced by almost half. I really want to get rid of this house, and would be willing to sell it for near the assessment. However, the realtor has been great and thought that was way too low. No offers yet, but it has been shown quite a bit. The listing price is $20k under the price my mother paid for it in 2010. I am mildly concerned that the low tax assessment is working against us.

[wc1934]

I don't like the idea of the house losing value.

Thanks for any input.

IMHO -It hasnt really lost value - I don't put much stock in assessments as your home is worth what someone is willing to pay. Bank the savings!!!

[jlwdm]

Tax assessments do not mean anything. Two and one half years ago I sold a lot for a client for $712,500. Assessed value was $275,000.

Most assessed values aren't this far off, but many are way off. I don't ever look at assessed value. I have one of my personal lots under contract for $450,000 and just looked up the assessed value - $250,000

Jeff

[Tony T]

Thanks for all the responses, more input is welcome.

Value of your home (for re-fi, home equity loans, etc) will be determined by recent comparable sales in your neighborhood, not the tax assessment. If anything, a lower tax assessment is more desirable to a buyer, as he will have a lower mo payment.

[oldpotatoe]

My town recently contracted with a company to do new assessments for property taxes. Most houses in my neighborhood were assessed higher, but ours actually went down in value. I went through the materials from the company, and I strongly suspect the reason was they sought comps based on the style of home I live in, and looked for comps in other neighborhoods. The assessments must have been done from the street (i.e., they didn't actually come inside my home).

Of course I'm happy to pay lower property taxes, but I've made some major improvements to this property (including a very nice bluestone patio last summer) and I don't like the idea of the house losing value. Most people who dispute assessments do so because the town or city values the house too highly, but is there any reason to be concerned about an assessment that's too low? If I were buying, I'd think that would be a good selling point, but the whole thing bothers me.

Thanks for any input.

Good for you..less taxes and when it comes time to sell..it's whatever the market will bear and looking at comps in the area. Not necessarily this tax assessment.

Across the street, tax assessment was MUCH lower than a house just sold for. Like 6 figures less. AND unless I'm wrong, tax assessment does not equal selling price. So, new owners will pay taxes on lower tax assessment, not what they paid.

[pdmtong]

What? Here tax is reassessed upon change in ownership. Allegedly it's 1% plus some extras but actual for me was more like 2% Problem is a starter house is $1.5m ish .....

It's a huge disincentive for people who've owned for awhile to move - which is why there are lots of near tear downs everywhere

Sales tax 8%
87 regular back around $3/gallon

Other than that sunshine everyday and sadly no rain. State has about a year if water left in reservoirs then unknown what happens next

[djg21]

Tax assessments do not mean anything. Two and one half years ago I sold a lot for a client for $712,500. Assessed value was $275,000.

Most assessed values aren't this far off, but many are way off. I don't ever look at assessed value. I have one of my personal lots under contract for $450,000 and just looked up the assessed value - $250,000

Jeff

Where I live, market prices for homes are often significantly more than assessed values. My sense is that it helps resale because potential purchasers know that and we live in a relatively nice suburban neighborhood. I've now refinanced twice to take advantage of lower interest rates, and the assessed value has never been an issue.

[Schmed]

I think you have made the mistake of thinking of YOUR possible downside. You have none. You have UPSIDE. But.... you are being selfish. Your lower tax assessment is lost revenue by our government. As such, they can't continue programs like...

a. $371,000 to study if mothers loved their dogs as much as their own kids by studying the way their brains responded to pictures of both.


b. $1.97 million in grants to crate a new communication network for “fossil enthusiasts and professionals.”

c. $307,000 to study the impact schools of swimming Sea Monkeys have on ocean current.



More fun facts: http://www.forbes.com/sites/anthonynitti/2014/10/22/how-did-the-government-waste-your-money-in-2014-separating-fact-from-fiction/2/

:p

[notsew]

Assessments, which the government does, and appraisals, which are done when you buy or sell, have nothing significant to do with one another. This is a win for you, no downside. Buy yourself a new bike with the savings. :-)

[1centaur]

I think you have made the mistake of thinking of YOUR possible downside. You have none. You have UPSIDE. But.... you are being selfish. Your lower tax assessment is lost revenue by our government.
:p

Not true. The government raises the money it chooses to raise by changing assessment or rate or both. They can assess at half the value and tax at twice the rate if they feel like it. Towns that assess below appraised value do it to cut down on one-by-one valuation appeals. Rate appeals are effectively only done at the polls.

[Ralph]

Not true. The government raises the money it chooses to raise by changing assessment or rate or both. They can assess at half the value and tax at twice the rate if they feel like it. Towns that assess below appraised value do it to cut down on one-by-one valuation appeals. Rate appeals are effectively only done at the polls.

That's how they do it around here, and some other places where I own real estate. They set the assesed rate at about 1/2 market value, and then set the millage rate high enough to collect the taxes they wish to collect.

Some times they trick dumb real estate owners buy runnimg for office claiming to lower the millage rate (taxes), and at the same time allowing the assessed value to rise as market rises....thus giving local governments an increase in taxes collected, while claiming (accurately) they have lowerd the tax rate. Voters are mostly like sheep.

[jlwdm]

Not true. The government raises the money it chooses to raise by changing assessment or rate or both. They can assess at half the value and tax at twice the rate if they feel like it. Towns that assess below appraised value do it to cut down on one-by-one valuation appeals. Rate appeals are effectively only done at the polls.



Not so in my experience. Most taxing entities have limits on rates so lower values cost the entity money. Although there are normally limits on the amount that taxes can go up in a year in total and individually. Low values are usually a function of low staffing and not keeping up with increasing values.

Jeff