I Only Want to Pay Taxes on the "Sold" Price, Not The Appraised Value.

By
Real Estate Agent with RE/MAX Distinctive / LIC in VA

I ran into another recent homebuyer last week that said she wanted to contest her real estate tax amount. She and her husband bought a foreclosure at more than 25% discount from what the appraised value came back at. You would think they would be happy since the house didn't need too much work? No, the county was taxing her on the appraised value of the real estate, not what it sold for. She didn't agree with that. She wants to only pay taxes on the amount they paid for the house. I told her that assessments flucuate, but the county can do their own appraisal of value, and use that amount for tax purposes. Most people that I know that contested their real estate assesments either didn't get far, or got just a small reduction.

 Post from land records manager: " ...notice to our land records customers related to the determination of actual value of property when a deed is presented for recordation and the consideration of the deed is lower that the assessed value of the property being conveyed. The Code of Virginia places a statuatory requirement on the clerk to base the recordation taxes for a deed upon the greater of the consideration or the actual value ( see VA. CODE $58.1-801.)"  " An opinion of the Virginia Attorney General....states that the clerk must base the recordation tax on the actual value when the consideration is clearly less than the value of the property. One of the tools available to the clerk to determine the actual value is the real estate assessment information available from the assessor's office." ... That is not the ony tool that the clerk may use to determine actual value... the clerk may use other evidence, such as a real estate appraisal completed and certified by an appraiser."

 So, even if you paid $150,000.00 for a property that appraised for $200,000.00, you will most likely be taxed on the $200,000.00 amount. If you want to contest your assessment, you will need to have another appraisal done showing you house appraised for $150,000.00, and take that evidence to Clerk. They will review it, and maybe you can get some adjustment made. If so, the clerk will make a notation on the deed indicating that the appraisal was used for purposes of ascertaining the actual value.

But, how do you explain an appraised value of $200,000.00 in July 2011, and a appraised value of $150,000.00 in Sept 2011? " "LUCY, somebody gots some splaining to do."

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Rainmaker
234,078
Anne M. Costello
Weidel Realtors - Yardley, PA

Jeff: This is a great explanation of a very confusing process in most areas. I agree, buying a house substantyailly less than appraised value should be reward enough.

Sep 05, 2011 08:33 AM #1
Rainmaker
363,091
Marco Giancola
Douglas Elliman Real Estate - Miami Beach, FL
Realtor (305)608-1922, Miami Beach Florida

Hey Jeff-I think that the assessment value done by the county is the fairest to all homeowners and the community. They are not always right but it keeps a fair and even playing field I believe. Why should one neighbor get a huge break because they stole a property in a distress sale? They already got a break in my opinion.

Sep 05, 2011 08:35 AM #2
Rainmaker
1,407,512
Andrew Mooers
MOOERS REALTY - Houlton, ME
Northern Maine Real Estate-Aroostook County Broker

Jeff... It is worth going to the hearing with the local tax assessor, and armed with other sales of homes like yours to build a case you just want to be treated like others in the area. It is public information what all folks pay. Do the home work. I got $10,000 off my personal home with this approach when a new assessment was out of whack Even the "reviewed, hearing, no change" notation on the local property tax assessment card lets the next revaluation review know "this owner is watching, will pick up the phone, set up a hearing." Assessments of areas we deal with are 25% flawed. Too high, too low but for a down and dirty lightning through the entire town assessment, they work. Speak up.

Sep 05, 2011 08:35 AM #3
Rainmaker
1,007,844
James Dray
Wise Custom Realty - Bentonville, AR
AR., MO., or OK. I can find the home for you.

We have that same issue here.  The only thing is for an appraisal the appraiser takes two homes in the neighborhood and then one at large.  With all the foreclosures the home usually appraises at a lower value

Sep 05, 2011 08:38 AM #4
Rainmaker
647,287
Barbara Hensley
RE/MAX Properties - Rockwall, TX
Homes for Sale in Rockwall County, Texas

This seems to be handled differently in many areas.  I have had clients that simply took their HUD Statement to the tax office and received a reduction.  Not sure that this works for all but it has worked in many cases.  

Sep 05, 2011 08:38 AM #5
Rainmaker
1,142,063
Sheila Anderson
Referral Group Incorporated - East Brunswick, NJ
The Real Estate Whisperer Who Listens 732-715-1133

Good morning Jeff. This post made me smile. Every state is different in how assessed values reflect what we would call actual value. In New Jersey, only new construction is assessed at 100%: each municipality determines it's percentage otherwise. The disparities are great and appeals, documented will often provide some relief.

Sep 05, 2011 08:54 AM #6
Rainmaker
233,466
Doug Dawes
Coldwell Banker Residential Brokerage - Georgetown, MA
Your Personal Realtor

I see people using appraised and assessed interchangably.

Assessed value is a number used to determine your Real Estate local tax

and determined by an assessor, not an appraiser. Yet, this is government

and taxation that we are speaking of. I morally agree with the buyer in this

instance BUT for the purpose of local government we have to have an equitable

system for taxation. The buyer should fight "City Hall" and attempt to receive

a reduction.

 

In my mind the marketplace is the determiner of true value. In a distressed

sale no one is pressuring the bank to rid the property for a song.

Sep 05, 2011 08:57 AM #7
Rainmaker
284,846
Jeff Pearl
RE/MAX Distinctive / LIC in VA - Leesburg, VA

#1 Anne- I know we're in a constantly changing market now, but why the rush to contest your assessment? Doesn't that also reduce your equity in the property? I would wait 6 months and monitor market. Maybe they will reduce it?

#2 Marco- I agree. County assessments are much more accurate these days. Thye have access to a lot more information thanks to the internet.

#3 Andrew, yes, sometimes it's worth contesting, but less the 2 months after closing? Suppose they had to sell in oine year for some unexpected reason, they immediately turned their sale into a potential short sale because they got the value reduced 25%. I say monitor market and if valus keep dropping, sure apply for the reduction.

#4 James- It's a mess and hard to keep up with. I'm sure 3 appraisers would come back with 3 different values. Maybe things will balance out soon?

#5 Barbara- It probabl;y is different in every State, but some kind of evidence should be required to prove your case.

#6 Sheila- Yes, it ooks like it will be a constantly changing process for quite a while. Values could drop again in some areas, yet rise in others. I guess each owner just needs to monitor their community sales, and when the time looks right, go ahead and file an appeal if you think you are being over taxed.

#7 Doug- You're right, Assessed Value, Appraised Value, and Sold price can be 3 completely different amounts. At one time everything was selling for 15-25% above assessments, then for a while, assessments and Sold prices were about equal, and now, Sold prices can be 10-25% below assessed values. So who is right? Many counties only update their assessments every 6 months, some every 2 years, etc. These days, everyone must just monitor and stay on top of the market, and hopefully an accurate value can be agreed on.

Sep 05, 2011 11:09 AM #8
Rainmaker
757,488
Ron Marshall
Marshall Enterprises - Saint Michael, MN
Birdhouse Builder Extraordinaire

Jeff, we went to the county once with an appraisal done by a bank....they told us they have "leeway".  And kept the assessed value right where it was.  Oh, well.

Sep 05, 2011 06:38 PM #9
Rainmaker
136,158
Steve Stenros
Poway,La Jolla,Del Mar,Mira Mesa,Carlsbad,Escondido,Temecula - San Diego, CA
CREIA MCI, ICC, Home Inspector,San Diego

Jeff, I love your last line! Thanks for explaining a very common misconception!

Sep 06, 2011 09:55 AM #10
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Rainmaker
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Jeff Pearl

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