Ways to Get a Fair Tax Assessment
Since real estate stopped booming, many people have protest that they couldn't sell, buy, or refinance a house due to an appraiser using bank-owned (REOs) or short-sold comparables in the appraisal process, which brought their home values down.
Their complaints have become so noisy that legislators in four states (outside of California), have introduced state bills that would forbid appraisers from using comparables of distressed properties. Although none went all that far, a Congressional bill, HR1755, would prescribe the same. I'm constantly hearing from people disturbed that they're not able get the property taxes on their property dropped because the assessor in their county will not look at REO's or short-sale or properties as comparables.
Richard Jans of Stockton says that when his condo was refinanced in July, it appraised for $260,000. The bank appraiser used three other condos as comparables: One was in his same building and sold for $280,000 in May 2011, another in his same building sold for $230,000 in January 2011 and a similar property nearby which sold for $260,000 in January.
However when Jans received the 2011-12, property tax assessment, his condo had an assessment at $300,000 - identical to the year before. Jans believed it should be less than $300,000 based upon the appraisal by his lender. He asked San Joaquin County Assessor Kenneth W. Blakemore's office for an informal assessment review and included the bank appraisal together with the three comparables.
The very first person he talked with refused to review his application. Jans then asked to talk with a supervisor, who told him he could not use the $230,000 comparable because "it was probably a short sale" while "a value far from most others" could not be counted, Jans says. Jans said he was then instructed to submit a formal application with the San Joaquin appeals board.
Jans was left wondering why bank appraisers can distressed property sales as comps although county assessors will not.
Property Tax Assessments
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The response: In California, some county assessors will look at distressed sales however it ranges widely by county, neighborhoods and property. In general, assessors like to look at regular comparables first and if that's are enough, ignore any bank-owned or short sales. Although if the are not a sufficient amount regular sales, or the property is located in an area overshadowed by distressed comparables, they will look at them. It's not always simple to spot distressed sales, sending some assessors will dig deeper to uncover the makeup of a comp than other assessors.
Proposition 13, states that property is to be assessed upon an ownership change at it's fair market value. That is typically identical to the sale price, however "in the foreclosure and other distressed sales, the selling price may not be even close to fair market value," said San Joaquin County Assessor Kenneth W. Blakemore.
In between ownership changes, assessors may only raise values only equal to an inflation rate (which does not more than 2 percent per year) plus any value of major additions or improvements. Under Prop. 8, Property owners who believe their property's market value has dropped lower than its assessed value may ask for a interim decrease to it's fair market value.
So What is Fair market value Under California state law, "fair market value is the amount of cash or equivalent that property would bring if exposed for sale in the open market under conditions where neither the buyer nor seller can take advantage of the exigencies of the other," states Ron Thomsen Alameda County Assessor .
Using the above code, it doesn't seem that sales of distressed properties should be used for comps as they involve pressing needs or exigencies, Thomsen says. Although in reality, Thomsen will use them, "particularly if no other verifiable comps exists that are not foreclosures or short sales."
Larry Stone, Assessor for Santa Clara County says "back in a normal market, a foreclosure was actually an abnormality ... while we would just ignore it." Today, "There are areas where there are not many foreclosures (like Los Altos Hills or Palo Alto), we continue to ignore them." In areas with many foreclosures, like the eastern and southern portions of the county, "foreclosures can't be ignored."
Sep 5, 2011
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