Real Estate Appraisal Insight From the Expert

Property Taxes- How are they Determined? (ported from Blogger)

Response to a question posted by Loralei:

A reader had a question about her property taxes. She purchased her home 12 years ago and has refinanced twice and has a 2nd mortgage on the home. Do appraisals affect the property taxes?

The quick and dirty answer is: No. Refinance appraisals do not affect your property taxes. But when you buy your home and the transaction gets recorded in county records, then your property taxes will definitely be affected. Actual market purchased set the baseline that is used to assess property taxes.

Property taxes are assessed annually by your local assessor (usually at the county level). Your property and every one of your neighbors is appraised using the same appraisal principles utilized for mortgage purposes. Now the assessor is not physically measuring each property and going inside to check things out. They typically rely on tax records which show your property’s characteristics- sort of like what we call a “Drive By” appraisal. But do they actually visit your property in their car? I’m sure some of them do, but I would guess that most homes are not viewed in person by the assessor or thier staff. So if your tax record shows that your home is 2300 square feet and you know that it’s actually 2800, then you should be pretty stoked (for tax purposes). However, if you refinance your home and your lender only orders a drive by appraisal, then you’ll only get credit for that 2300 square feet- Catch 22? Perhaps.

Your actual property tax is then based on a cumulative analysis of services that we all use- police, fire, schools, library, city hall, etc. Yes, this is how our teachers and mayors get paid. If you are a tax paying homeowner, you have a right to get mad at that police officer who gives you a rolling stop sign ticket at 2AM- that’s your employee! But anyway, once they figure out how much it’s going to cost to run all these services and how many properties are in the municipality, they do some simple long-hand division and your county tax rate is determined accordingly. That rate is then multiplied by your property’s “Full Cash Value” to determine the actual amount you owe. So if you have more property, you pay more taxes. If you have a 700 square foot home on a 4000 square foot lot, then you might not want to start yelling at that officer who’s writing that aforementioned ticket. You have 8 kids living in your 1000 square foot home? Well you’re getting a smoking deal on your kids’ education.

Now the big question is how accurate the county’s appraisals are. And to be honest with you, I’ve seen their values spot on and I’ve seen them way off- sort of like Zillow. Some assessor websites sites allow you to pull up a specific property and then click a link for “similar properties” which in the case of my own primary residence turned up 5 sales- all from between 2005 and 2007… of which 3 are over a mile from my house (and I live in a tract home) If you want to learn more about how your particular value is determined, ask your assessor.

You can see your “Full Cash Value” by which your tax assessment is based simply by visiting your county assessor’s website or visiting their office. If the assessed value is close to reality, then there’s nothing you can really do to reduce your property taxes.

The big issue nowadays is of course homes that have declined in value substantially over the past few years. So if you think your assessed value is too high, you should check with your own County Assessor’s office to get an appeal form- again, usually available online. If you know of recent sales that support a lower value for your home then you’ll want to itemize those for the assessor to review. But remember, the assessor is using the same basic appraisal principles as an appraiser is. If you really want to make your case, hire a reputable appraiser who can professionally demonstrate the value of your home in the “language” that the assessor will understand.

Visit our website at http://www.advantageappraisalsllc.com/. Give me a call at 480-544-1217 if you have any questions.

George