It appears that over the past fifteen weeks a total of six net new contracts have been written for market rate condos at Heritage on Fillmore (1310 Fillmore), and that 16 of the 68 market rate condos remain available for purchase (suggesting another eight months to go). And speaking of Heritage on Fillmore:
I just searched the SF Tax collector website to try and find the prices for condos in the Fillmore Heritage. I found about 53 units at 1310 Fillmore St, but what was strange was that none had values over $500k. Most were at what look to me like “below market” prices, i.e. $245k for a 1 bedroom unit. There were only four prices that ended in “99”: three at 399k and 1 at 499k.
I could understand that the BMR units probably made the tax rolls while perhaps the subsequent market rate units haven’t gotten on the tax rolls yet, but it still doesn’t explain why there’s fifty three (53!) with reported values less than the lowest selling price (~$500k).
Either there are about 49 BMR units instead of 12, or the tax records are somehow corrupted. Anyone know what’s going on?
Our only guess would involve an interim transfer of title for unsold units (from one development entity to another), but once again that’s only a guess. Readers?
UPDATE: The answer according to a plugged-in reader: “The tax roll initially does not reflect the sales cost. It works that way for every new building in the city. You buy a place for say a million and the tax collector has an estimated value of the property for, say, $500k. So you pay tax on the estimated amount at first. Then down the road the tax collector sends you a true-up bill (the difference between the million and the $500k).”
Now we just need to know why (or perhaps it’s better that we don’t).
UPDATE: A bit more clarity (and hopefully not confusion).
∙ A Heritage On Fillmore Un-Official Update: 22 of 68 Available [SocketSite]
The tax roll initially does not reflect the sales cost. It works that way for every new building in the city. You buy a place for say a million and the tax collector has an estimated value of the property for, say, $500k.
So you pay tax on the estimated amount at first. Then down the road the tax collector sends you a true-up bill (the difference between the million and the $500k).
I own a condo at the Fillmore Heritage. I initially got a property tax bill listing my condo value at less than $500K. About a week later, I got another notice from the tax assessor stating the true sales price of my condo and a note saying I’d owe alot more in taxes. sweet.
This happens because once a property converts to condominiums the developer must treat every property as an individual unit, i.e. they must pay property taxes and HOA dues on all unsold units. I believe that this initial tax number is the developer’s estimate of the cost of the unit and will serve as the cost basis for determining capital gains from the sale. It gives you some general idea of the (minimum) profit margin on some of these buildings
The assessed value of a new development (as all properties) is calculated on July 1 when the tax rolls are closed. For a new development, this is based on a rough (and I mean rough) estimate of the construction costs in place. Then when a unit sells later in the year, it triggers a mid year re-assessment based upon the sale price per Proposition 13 rules and you get that additional tax bill known as a “supplemental” tax bill.
I bought new construction in 2004 and did not notice on the invoice that the tax amount was not based on the nmarket price I paid. Thus I paid what the staement said i owed. Then in November 2006 I received about 20K in what was referred to as “Escape Taxes and Supplemental Taxes.” I was told by the county tax collector the developer has up to 4 years to update the tax information to reflect the market value of the unit. This is true because I had to pay all the taxes before I could sell my unit in March 2007.
It’s not the developer updating the assessed value, it’s the county assessor. If the sale is just before the July 1 cut off, they might miss the resale for that tax year as it takes a couple of weeks for sales to show up in most publications of the public record, so in that case, you’d get a one year break. A supplemental tax bill based on a 4 year old sale is unusual – sounds like they missed the sale 4 years ago and are trying to make amends.
I think ‘we’ need an expert to answer these items. I don’t believe a lot of the info is correct…get help
The tax assessments shown are based on the previous year’s assessed value (prior to their sale to new owners.) As I understand it, when property is under construction as on January 1 (tax assessment date), the property owner submits information on the percentage complete and the estimated total costs, and that information (subject to validation by the assessor) is used to figure the assessed value for that year.
Once the property is completed and sold, the property (or in this case, each unit) will be reassessed as of the sale date, at the purchase price. But it takes some time for this to actually work its way through the bureaucracy, which is why a new property owner might receive a tax bill based on the old assessed value, and then later receive a supplemental tax bill that makes up the pro-rata increase in value based on the sales price and new assessment.
So the values you’re seeing online are probably the January 1 assessed values (maybe not even from 2008; I think new construction is exempt from supplemental assessment until finished and sold, so the values you see might be based on some older estimate of value) which might reflect a partly-completed building and are probably more based on the developer’s cost than the market value.
I’ve been through the supplemental assessment thing a bunch of times but don’t consider myself an expert, but this is my understanding of things.
This is very timely as many of us are now putting our financing together. My lender advised me not to impound taxes for the very reasons discussed here. He said I’ll get a short bill and then maybe two years later get a massive supplemental – so just better to keep the $$ in the bank until it is needed.
Obliquely related question: can anyone comment on the City’s program regarding keeping the tax rate on your current property if you buy another? Does anyone know how old you must be to take advantage of that? I called the Tax Collector a few times, left a message, bupkis. Thanks.
Mike@Arterra: This is actually a state-mandated program (well, voter-mandated, via Props 60, 90 and 110.
Basically, if you are 55 or older, or severely and permanently disabled, you can transfer the base year value from an existing residence to a replacement residence IN THE SAME COUNTY. Some California counties allow you to do the transfer to or from a property in another participating county. However, SF isn’t a participant, so if you sell an SF property, the replacement must also be in SF.
The new property must be purchased within 2 years of the sale of the old one, and must be of equal or lesser value than the original. It’s basically intended for those who are downsizing, not upsizing.
This only works if the original property is sold to a third party and gets reappraised after the sale. If you transfer the old property to one of your children, for example, it would be excluded from reappraisal, and therefore the base value transfer would not be allowed.
You have to file a claim for the base value transfer with the assessor’s office within three years of the purchase of the replacement property.
Hope this helps!
Thanks Dave!
Here’s how it works for a new building…
The builder buys the land for $1 million and then constructs the building for $1 million. Each unit’s assessed value will be a pro-rata share of the $2 million total assessed value for the project as a whole. So, for a 10 unit project the per unit assessed value would be approximately $200,000.
The tax year is the fiscal year – July 1 through June 30.
The total assessed value for a new building is usually based on the actual price paid for the land, plus the estimated cost to construct, which usually is shown on the building permit.
Now, assume you buy a unit on April 1 for $400,000. You will owe taxes from that date on. The taxes for the initial year, based on the builder’s assessed value, will usually be pro-rated in escrow. In this case, the developer would be credited for taxes already paid from the date of sale to the end of the fiscal year, which is now your burden.
Now for the supplemental. Because of Proposition 13 way back when, property is assessed at market value upon sale, which usually means the selling price. The tax rate is 1% of the assessed value, plus some amount for bonded indebtedness and special assessments. In subsequent years, the assessed value, ergo the taxes, can be increased no more than 2% annually. The assessed value is also subject to downward adjustment if the market value.
So let’s call the tax rate 1%. The developer’s taxes on $200,000 would be $2,000. However, your taxes would be based on the $400,000 you paid, or $4,000. The developer would be credited for three months of taxes already paid at the old assessed value. You would be debited for the same amount. You would also owe additional taxes for the difference in assessed values between the price you paid and the developer’s assessed value.
At some point, the unit will be reassessed at market value, and you will get a “supplemental” tax bill. My experience is that in SF the assessor’s office is very inefficient, so it may take a long time. In some counties, it happens very quickly. I appraise large properties. I have comparables in my file for sales dating from 2006 that have not yet been reassessed. And I thought the city was in a budget “crisis.”
Miles summed it up correctly at 10am, the thing that I found odd is that the real estate agent did not mention the supplemental tax issue. Mine was very clear about it and it was not a surprise when I got hit with it.
I just love this internet machine thing.
Im closing on a new property and saw this tax line item on the closing statement. The comments here are extremely valuable. I doubt you could find this info anywhere else explained in such an easy to understand manner.
Great job Socketsite (and commentors) (and search plugin).
Dave, unless things have changed since 2006, SF is a participant with certain other counties in the state-mandated program you mention. Alameda, Contra Costa, Solano and San Diego are elibible counties, Marin is not.