April 3, 2008
Assessing The Potential Upside Of A Down Market: Property Tax Basis
“If your home is worth less than you paid, chances are you also can get a temporary reduction in your property taxes - without a battery of lawyers or dubious arguments about functional obsolescence."
"Some companies offer to submit a request on behalf of homeowners for $25 to $200, or a percentage of the property tax reduction. But there's no need to pay for this service.”
“In most counties, you can simply call or write your assessor's office or download a form from its Web site and mail it in. It helps to provide recent sales prices for comparable homes in your neighborhood, but it's not necessary. The assessor's office will be looking at its own comps. If the homeowner and assessor cannot agree on a value through this informal process, the homeowner can file a formal appeal with the county's assessment appeals board.”
First Published: April 3, 2008 6:30 AM
Comments from "Plugged In" Readers
I am sure that's a great relief to the owners whose houses have decreased 10-20% in value.
By the way does anyone else have trouble posting ? Everytime I post a comment I get an error message even though the post seems to have made it.
Posted by: Snafu at April 3, 2008 9:16 AM
Snafu, your loss is only a paper loss unless and until you sell, whereas taxes are all too real a carrying cost. Personally, I was quite happy to see my taxes reduced in the 90's... and then of course prices recovered and we subsequently entered the bubble era.
Posted by: Amen Corner at April 3, 2008 9:22 AM
The whole backlash against Ellison I think is unfounded and the articles written in the two papers I saw did not adequately explain what happened there. Not to overly defend a billionaire trying to get away with paying less taxes, but when a home is built, it is assessed on the cost of construction basis. When it is complete, it is supposed to reflect the market value of the home per Prop 13. With Ellison's property, they went so overboard with the construction costs (best in the world/spare no expense was the mantra according to friends who worked at the site) that they sank $150 million into the property as I recall from the article. Well, up until a few years ago, no single family residence had ever sold for more than $50 million much less $150 million in the entire country, so this was truly a case of over-improvement. I think they rightly adjusted the assessed value to what they estimated was the market value of the property.
And as far as adjusting your taxes down, the traditional way was to pay $400 for an appraisal and submit this with your request for a lower assessment so that you would have some market data to back up your claim of a specifically lower market value. However, unless your property value has dropped quite a bit, it's hard to justify this expense for most homeowners. So this could be a good time to work some of the brokers in your area that pepper your mailbox with their advertisements - ask one or two of them to run a few MLS sales in your neighborhood for a CMA (Competitive Market Analysis). Make sure they print out the entire detail listing sales data for you as those one line sales summaries are useless. And lastly, remember that once the market recovers, your tax basis is immediately raised back to the Prop 13 base which you started with, so these are only temporary reductions in your assessed value.
Posted by: Miles at April 3, 2008 10:42 AM
And as far as adjusting your taxes down, the traditional way was to pay $400 for an appraisal and submit this with your request for a lower assessment so that you would have some market data to back up your claim of a specifically lower market value. However, unless your property value has dropped quite a bit, it's hard to justify this expense for most homeowners.
I was able to lower the taxes on my condo every year from 2001 to 2006 (saving thousands of dollars) just by gathering some comps myself from the web and faxing them over. In some years the person the assessor's office did a quick scan of recently sold units nearby and lowered it on the spot. Another time someone from the assessor's office came over and did their own inspection.
My experience is that it's a very easy process, no need for a broker or an appraisal.
Posted by: anon at April 3, 2008 10:53 AM
"Snafu, your loss is only a paper loss unless and until you sell, whereas taxes are all too real a carrying cost. Personally, I was quite happy to see my taxes reduced in the 90's... and then of course prices recovered and we subsequently entered the bubble era."
Spot on. While I'm bummed to see my property value drop by 10% since purchase, I'd rather see the $1000 savings per year over the 15+ years I plan to live in my home. Hey, that's another $1K/year of REAL money I can plug into my sinking ship of a house. Oh wait...that doesn't sound so happy.
Posted by: ZapBrannigan at April 3, 2008 11:45 AM
it's funny how the market downturn becomes real when it comes to calculating property taxes...
Posted by: trevortrevorson at April 3, 2008 12:09 PM
Reducing property taxes isn't a new concept. About 5 years ago my neighbor flooded his unit and subsequently caused damage to my unit that cost over $80K to fix. Mold damage and water damage. I contacted the tax assessor's office and told them my unit was worth $0 during the timeframe it was being repaired because I would not be able to sell it. They agreed and waived my property tax for that timeframe.
Posted by: Lori at April 3, 2008 12:40 PM
I don't know how sophisticated San Francisco is in estimating the worth of a property (never owned property when I lived there). I will say, though, that there are 3rd parties who sell software that evaluates your property. Think of Zillow except with a different, equally hidden, formula for the Zestimate, with comps from MLS. Where I am (Austin TX), they even have high-resolution pictures of your house taken from a low-flying plane. So, if you've added an improvement visible from outside, your assessor will know and show you when you protest.
Posted by: Ezekiel at April 3, 2008 1:12 PM
"So this could be a good time to work some of the brokers in your area that pepper your mailbox with their advertisements - ask one or two of them to run a few MLS sales in your neighborhood for a CMA (Competitive Market Analysis)."
Well, be careful which brokers you use...if it's the ones on SS you might even end up with a higher tax bill! ;-)
Posted by: Foolio at April 3, 2008 1:25 PM
"I contacted the tax assessor's office and told them my unit was worth $0 during the timeframe it was being repaired because I would not be able to sell it. They agreed and waived my property tax for that timeframe."
Lori, this can't be true. I'm sure the Assessor's Office lowered your bill but no way can they ZERO it out. Your property bill is split between 2 things. The land and the building. I can see them lowering your building assessment but the land value stays. Right?
Posted by: jk at April 3, 2008 1:50 PM
Question here - My home has dropped approximately 100K in value since it was last assessed, based on two comps within one block over the last six months (one is the house next door, and both comps are virtually identical to my home.) I have hesitated to request a revised assessment because I have an unwarranted renovation that was put in prior to my purchase. If I request a revised assessment, am I in danger of exposing the unwarranted addition and having the city tell me I have to rip it out?
Posted by: BernalDweller at April 3, 2008 2:27 PM
BernalDweller, the simple but maybe not accurate answer is no. The assessor office does not work directly with DBI. 90% of request do not need an inspection. I would send in the form and hopefully they will grant it on the spot. If truely your neighbor's house is a good comp, they should grant it right away. If anything, they will just drive by your house and take a pic of the outside of your house and the comps. Hope this helps.
Posted by: jk at April 3, 2008 4:52 PM
Thanks, jk. Much appreciated. I'm still weighing the $1k/yr savings vs. the potential loss of my much beloved but unwarranted master suite. Might be worth the $83/mo. to "rent" my unwarranted addition. If the comps fall further, I may have to reconsider. Again, thanks.
Posted by: BernalDweller at April 3, 2008 10:30 PM