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Minimizing assessed value?

CamG
11 years ago

I've spent the last year trying to figure out how to get the most bang for my buck out of the house we'll be building--most features and space for the cost, etc. Far too late, it occurred to me that all these great features we're excited about will also cause of assessed value to jump. I had figured the rough idea of our tax with a smaller, more modest plan, but when I looked hard at our latest iteration, I was a bit alarmed to see that our property tax could well equal 50% of our mortgage.

I'm wondering if any of you have any advice on how to minimize one's assessed value? I don't want to be dishonest or hide anything--render unto Caesar, after all--but rather to weigh the value of a feature against its effect on our tax assessment.

Some things I was on the fence about that I think we will definitely skip, as their effect on the assessed value (plus their original cost) is not worth their benefit to us:
-A soaking tub in the master bath
-A masonry fireplace (we'll get a nice electric one later)
-A three car garage

My own examination of the similar properties in the area has indicated that these things substantially increase assessed value. Any other ideas? I'm sure this varies from market to market, but I was curious as to whether anyone else had thought along these lines.

Comments (38)

  • kirkhall
    11 years ago
    last modified: 9 years ago

    In my area, assessed value is mainly based on location and square footage. I don't think the assessor cares a hoot about a soaking tub (though, buyers do).

    Is there a way for you to talk to your assessor/assessor office?

  • graywings123
    11 years ago
    last modified: 9 years ago

    In some areas, finished basements are assessed at half the value of above ground finished space.

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  • User
    11 years ago
    last modified: 9 years ago

    Assessments are about square footage and location and amount of property. Finish level only indirectly affects that, and not to the degree that most people think. Most of the value of any home is in it's location. A 4000 square foot home in the middle of nowhere won't assess like that same home build in the middle of Chicago for instance. Go ahead and put all of your stuff that you want in your plan. You're going to take the hit regardless of if you include it or not. If you live in a community of 900K homes, and you are building similar square footage, you can expect to be assessed similarly.

    And your bank will be the same way. Finish level only indirectly affects the loan assessment. If you spend 1.2 in a community where most of the homes are 900K, then you are very unlikely to be assessed above 1M. There's only so much variance in value due to trim level. It's location and square footage.

  • CamG
    Original Author
    11 years ago
    last modified: 9 years ago

    Thanks for the thoughts. I've put together a little spreadsheet, and the assessed value for nearly identical, single-story houses all on the same block, built within 2 years of each other, varies between $160/sf to $180/sf. The significant variable seems to be finished basement area. There are few two-story houses in the neighborhood, but the assessment of similar houses appears to be about $135/sf, in a house that included a finished basement.

    So obviously a 2 story is assessed less/sf than a single story, and the basement finish appears to affect it as well.

    Kirkhall, I will have to call the assessor, that's a good idea.

  • mtnrdredux_gw
    11 years ago
    last modified: 9 years ago

    I disagree. It depends on where you are.

    That is why you should ask to see the forms they use, and you will know for yourself what they look at.

    For example, in my last house in NoNJ, they had a ranking system for things like the quality of the finishes, from 1 to 30. They also ranked your views.
    So it was not just lot size and sq footage ..... as I understand it to be in some areas.

  • dekeoboe
    11 years ago
    last modified: 9 years ago

    Where we live the houses are also graded based on quality. Then they also do additions and subtractions for certain items, like a fireplace, type of heating system, etc. Calling the assessor's office is the best way to understand the process.

  • brickeyee
    11 years ago
    last modified: 9 years ago

    " Calling the assessor's office is the best way to understand the process."

    Though many will not reveal the dirty details.

  • joyce_6333
    11 years ago
    last modified: 9 years ago

    In our area, it appears that house and lot size have little to do with assessed value. Our house is probably at the top end of house size, but on the low end of lot size. 3 homes within eyesight of our house, have taxes at least $1500 - $2500 less than ours, with larger lots. One house in particular has the same square footage as ours... and the lot is at least twice as big as ours with direct frontage on the golf course. Yet their taxes are $2000+ less than ours. It's all a mystery to me.

  • carsonheim
    11 years ago
    last modified: 9 years ago

    This is a major consideration for me as well. Our assessor's office uses a mysterious formula, but I think they just randomly assign a value by pulling it out of the air. "Oh, that house looks expensive... Let's call that one $750K" Our taxes are rather high here (College Station, TX), and assessment is based on the "market value" of the house. Even if you buy a home for BELOW the assessed value, you can try to argue, but the assessor simply says you got a good deal, as the house is really worth $xxx. However, the *true* value of a house is what a buyer is willing to pay...

  • CamG
    Original Author
    11 years ago
    last modified: 9 years ago

    We can see "datasheets" for each house, which presumably lists most of the considerations (sf, fireplaces, fixtures, etc.). It includes a 1-6 number rating for quality and year built. A new house is a "6" for year built, but this drops to "3" after 5 years... and nearly identical houses appear differ by $30-50k with the only apparent difference being the 6 and 3.

    I'm hoping to present this as the "we're trying to figure out what we can afford" angle, rather than "we're trying to dupe the county out of revenue..." We'll see how receptive they are to that. No calls today with MLK day.

  • brickeyee
    11 years ago
    last modified: 9 years ago

    Many of the appraisers try to hold the value down low enough to avoid a flood of appeals for 'market value' appraisals.

    If you would NOT sell for the appraised value, it is likely low.

  • sweet.reverie
    11 years ago
    last modified: 9 years ago

    Our appraiser did a full report. There was a long checklist but the most important factor were the comps. We are a bit screwed because we live in a very high cost of living area (second highest in our state) so even if we built a pretty small house, it going to appraised at a high value simply for where it is. We are building a 300K house and our appraisal came in at close to 500K. If the taxes are too high, I will probably dispute them because much of our land is unusable wetlands (our realtor suggested this to us). That would really be our only course of action in terms of changing the value. I thought the fact that we are not building a garage would bring the value down, but it seems to have very little impact on the value.

    I would not imagine things like a soaking tub are going to matter. However, the only bonus is that the bank loves our project since we have a very low LTV so our construction loan process was very smooth.

  • joyce_6333
    11 years ago
    last modified: 9 years ago

    I would be curious to know what other parts of the country are paying in taxes. We sold a home in Colorado in 2001 for $450,000, and the taxes were $2300. That same home sold last year for $645,000, and the taxes are still under $3000.

    Our current home was just appraised at $550,000 and our taxes are $7000. However our assessed value is only $350,000. So Brickeye, you are right on.

    The appraiser never went in our homes..ever. Has anyone ever been able to speak to an appraiser??

  • carsonheim
    11 years ago
    last modified: 9 years ago

    @joyce -- here in College Station, TX taxes on a home around $400K are around $9300. With our new build, I'm afraid our taxes are going to be in the $12K-$15K range... eeek!

  • DLM2000-GW
    11 years ago
    last modified: 9 years ago

    ***Has anyone ever been able to speak to an appraiser??***

    Ours came knocking on our door when we were about 10 months into a long renovation/addition. He wanted the new stuff on the tax rolls ASAP and was dismayed to see we weren't done. I asked, jokingly, "Aren't we paying enough in taxes??" He responded, "Are your taxes under 10k? They won't be after you're done." And they weren't. And are considerably higher than that now :(

    In our town, they rank quality of finishes, finished sq footage (basements are less even if finished with same quality as above ground), 3 season rooms or enclosed porches are less, too. But they also tax number of plumbing fixtures, so a master bath with 2 sinks, a tub, toilet and separate shower has 5 taxable fixtures. If you have a prep sink in your kitchen, that's an added fixture for tax purposes. I'd go to your assessor's office and get info - be prepared.

  • kirkhall
    11 years ago
    last modified: 9 years ago

    Appraisers are different than assessors.

  • User
    11 years ago
    last modified: 9 years ago

    $1200 a year here is all the taxes I pay on a 250K house and land. Which is a pretty decent house here. Of course, the tradoff to that is that I live in Mississippi. 50th out of 50 in so many things---and proud of it!

  • DLM2000-GW
    11 years ago
    last modified: 9 years ago

    kirkhall you're so right - my bad. Although joyce_6333 said appraiser and I quoted her, I assumed she meant assessor. That's what I meant, at any rate.

  • lethargo
    11 years ago
    last modified: 9 years ago

    Ugh. We're paying over 3000 on a house that we'd have a rough time selling at 150000! Herein MI. We had a house in IN that we sold last year for 212000 and the taxes were $800!!! Crazy nonsensical stuff to me. Looked at some houses the next town over, but same county. House 450000 asking price, over $10000 taxes!! Didn't have a kitchen, previous 'homeowners' ripped it out before dumping it.

  • joyce_6333
    11 years ago
    last modified: 9 years ago

    dlm2000: yes, I did mean assessor! Of course the appraiser comes inside the house! Thanks for catching my error. After reading what some of you are paying, I think I should be grateful that I'm ONLY paying $7000 in taxes.

  • chris11895
    11 years ago
    last modified: 9 years ago

    Our experience has varied by the town. In one town they only assessed from the outside, yet in my current town they come through the house and take note of everything. As suggested above, a call to your town will give you the answer. If they do go inside, I would list out the items you're thinking of and think about how much impact they'll really have. For example, I don't think a soaking tub is going to add 2k to your taxes. I also don't know if they'll care if your fireplace is masonry or a firebox, but the fact that you have a fireplace would have impact. I also suspect the three car garage will give you a hit.

  • CamG
    Original Author
    11 years ago
    last modified: 9 years ago

    Our levy is right at 2%, so we'll be paying about $6k if the house is assessed for $300k.

    I spoke with our assessor today. She said it is largely based on similar sales, and then adjusted based upon the particular aspects of the house. If we build with spartan amenities and low-grade finishes, she said it might reduce the "Quality" factor of the house, which seems like some kind of multiplier. She wasn't able to be any more specific as far as percentages or dollar figures go.

    So, my quest may have come to an end. I was hoping I might learn of a few things that really sky-rocket the value and then avoid those things--I still think a 3-car garage does--but I may be better off talking to an APPRAISER, rather than an assessor.

  • amtrucker22
    11 years ago
    last modified: 9 years ago

    "Posted by hollysprings (My Page) on
    Mon, Jan 21, 13 at 21:26

    $1200 a year here is all the taxes I pay on a 250K house and land. Which is a pretty decent house here. Of course, the tradoff to that is that I live in Mississippi. 50th out of 50 in so many things---and proud of it!"

    This cracked me up!

  • athensmomof3
    11 years ago
    last modified: 9 years ago

    Cam - our assessor looks at the same things yours does - similar sales. They really paint broad strokes over finishes - stone countertops are the same and evaluated as builders grade granite, even if you have calcutta gold or statuary or quartzite. Stone tile and ceramic tile really are not differentiated. No difference between wolf range and ge range for the most part. Handscraped hardwoods vs. laminate - no difference.

    Square footage and similar sales are where it is "at" so to speak ;)

    I don't know what your appraiser for your loan said but ours valued our house at about half what we have in it, which made it difficult to get a loan (!!!) but great when I talked to the tax assessor and was able to tell him what the appraiser said.

  • mtnrdredux_gw
    11 years ago
    last modified: 9 years ago

    Joyce,

    Hold on to your hat, tax bills can be crazy in the Northeast. Of course, like the Miss. poster said, part of that is getting what you pay for. If you look at the Newsweek School Rankings, they best rated public schools are almost all here in the NE (excluding charter public schools, which is cheating because you need to be accepted into those schools).

    I think I have seen two extremes in taxation. My tax bill in our last house, in NoNJ was $50,000. I am looking at a vacation home in another state that is selling for about 20% less than what our NoNj home sold for , but the property taxes there are 87% lower --- $6,500!

    Our CT home is asessed at about 2.5x what our NoNJ home sold for, and our property taxes there are 40% less than they were in NoNJ. So, why are property taxes so different? (and what the heck is going on in NJ, lol!)

    From my experience, and I know it varies quite a bit by region, there are several drivers of property taxes, including:

    1.How much does it cost to run your town? Does your town provide a lot of services --- eg well funded schools, parks, teen or senior centers, trash pickup, snow plowing, etc etc. ? Obviously the more services the higher taxes, all else equal.
    2.Is your town too small, and overburdened by having its own management and own PD and FD, rather than regionalizing or sharing services.

    3.What are the town's sources of revenues? Does it also charge an income tax or sales tax?

    4.What is the town's tax base? Are there significant commercial or industrial operations that will help share the burden? Or is it almost all residential?

    5.Are the demographics skewed towards single people, retirees, or toward families (families usually cost more than they contribute because you have to educate their kids)

    6.How are your schools funded? In our area of the country, funding is via property taxes. If the town is dominated by families, they will want good schools and vote in favor of higher budgets, usually. Of course good schools raise property values so arguably benefit all. Moreover, in areas like where we used to like in a NJ burb of NYC, the state funding for schools depended on how wealthy the district was. In a politically progressive move, the state decided that they would contribute less to school districts in wealthier towns. This raised property taxes in well to do areas.

    As far as any individual homeowner's burden, keep in mind one fact. Although taxes may be based on home values (loosely at least, as assessments do not always equate to appraisals nor should they necessarily), just because your house drops in value does not mean your taxes will. Home prices dropped over 30% nationwide, but whose town budget was able to drop 30% in tandem? No one's. Understand that the purpose of assessment is really to decide how to divvy up the burden of paying to run the town. I guess it could be done by unit, or per capita, but someone decided that if you have a nicer, bigger house on a nicer, bigger lot, than you should pay a bigger share to run the town.

    It is important to keep this in mind --- assessments are just a way for municipality to divvy up the bill for running the town. Let's say you are buying a house in a market where prices have fallen 30% in the last five years, and there has been no reassessment. So you decide to appeal your taxes. You can do it yourself, but in many cases people recommend you hire an lawyer to do it (not to sound too cynical but we had heard that if you don't hire a lawyer they automatically say no, if you do they automatically give you something to make you go away ( ymmv!). Whether you win or lose, it won't matter for long.

    Why? If everybody keeps appealing their taxes because values fell 30%, eventually the town will get 30% less revenue. Before that happens, they will go back and reassess everybody, and then reset the tax rate so that they get the money they need to run the town. So you may lower your tax bill temporarily, but eventually the town will just lower everybody's assessment along with yours, at which point they will have to set the tax rate higher just to maintain the status quo. Voila, back where you started.

  • brickeyee
    11 years ago
    last modified: 9 years ago

    "Home prices dropped over 30% nationwide, but whose town budget was able to drop 30% in tandem?"

    Terrible when the government cannot learn to live withing reasonable limits.

    Ever notice a government function that reduced its cost?

    Even seen the government actually solve a problem and decrease government size and cost?

    They must be pretty bad at solving problems.

    There is a stock joke in Washington, DC that a federal program is as close to perpetual as anything on the planet.

  • mtnrdredux_gw
    11 years ago
    last modified: 9 years ago

    Well, yes,Brickeye, that's a whole other post!

    But I doubt many homeowners would really want to see what a 30% reduction in costs felt like.

  • kirkhall
    11 years ago
    last modified: 9 years ago

    I would. Why a person needs to pay an annual salary in taxes is beyond me!

  • chispa
    11 years ago
    last modified: 9 years ago

    We had lived mostly in the NE, until we moved to CA a few years ago. If you are looking for crazy tax laws, this is the place! Due to Proposition 13, passed a long time ago, there is major inequality in real estate tax values. Your neighbor might own a house valued at $3 mill, but because he bought 25 years ago, he is taxed on the purchase price at that time, so he might pay $4k per year. If you bought his house today, yout tax bill will then be around $35K.

    It gets better. They allow the parents to pass on the lower tax basis to their kids. So now your higher taxes are paying for the neighbors grandkids to get educated. They also inadvertently introduced a loop hole for commercial properties under Prop 13 and have lost major sums of revenues for the past 30 years as Corporations took advantage of the loophole. Most of it makes no sense to a new resident!

  • mtnrdredux_gw
    11 years ago
    last modified: 9 years ago

    yes, Chispa ....wonder anyone ever sells in CA. Proposition13 sounded so good, im sure...

    Between your state and my states, no wonder everyone in the middle thinks we are crazy,

  • brickeyee
    11 years ago
    last modified: 9 years ago

    "But I doubt many homeowners would really want to see what a 30% reduction in costs felt like. "

    Especially when the local government makes ANY cuts as painful as they can for the folks paying the bill.

    Our government is perfection, with zero waste and nothing that is worth what is spent.

    Perfection incarnate.
    NOTHING can be squeezed from ANY public budget without horrible service impacts.

  • mtnrdredux_gw
    11 years ago
    last modified: 9 years ago

    Goodness, I hope I didn't sounds as though I was on the side of the municipalities.

    It's just that there is no particular reason that it will cost 30% less to run the town just because home prices fall 30%. Regardless of the direction of home prices, though, I think just about all of us would agree that the govt wastes money, especially local governments.

    But it isn't easy to solve. Take our old town in NoNJ. NJ is a very high tax state, and this town was among the highest taxed in NJ. But when they looked at things like sharing services with other towns, there is always one town that thinks it is trading up and one that thinks it is trading down ... and hence it never works at all.

  • akatricia
    11 years ago
    last modified: 9 years ago

    Here in Wisconsin, assessments are based on market value of the home. The problem lately has been the lack of comparables (due to the lack of home sales) that can be used to determine market value. We live in a lake area where homes are all unique...some 50 year old cottages (not many left, though) to fancy, large new homes, so coming up with appropriate values can be challenging. That said, we have successfully fought our assessed value a couple times. Assessors make mistakes (square footage, number of bathrooms, etc.), make wacky assumptions (your lot is more valuable because it's on the west end of the street instead of the east end). We always compare our assessed value to neighbors (should be public record) to make sure it looks reasonable. Also, be assertive in requesting info: it's likely the assessor is required to justify his/her assessment. If things look wrong, and the assessor insists it's right, don't be afraid to take it to the next level. My non-lawyer husband challenged the assessor in court and won, lowering not only our assessed value but our neighbors' as well. And most likely, your municipality doesn't want to incur legal fees fighting something that isn't justified. Finally, I found it valuable to look at the state assessors' manual. It gave good info on how the assessment is supposed to be calculated.

  • mtnrdredux_gw
    11 years ago
    last modified: 9 years ago

    By the way, FWIW, we did get our assessment lowered in NoNJ. One thing that never occurred to me at the time, was when we went to sell two years later and all the buyers used the (lower) assessment as part of their estimate of market value.

  • montel (CA US 10b/Sunset 16)
    11 years ago
    last modified: 9 years ago

    We are in California, and received our updated assessment on our 1 year old home.

    We finished our house last year, and held our breath while waiting for our adjusted assessment to come in. When it arrived a few months ago it was much lower than I expected. It looks like it was based on sold comps of the same square footage in our area. However, in our favor, there are no new homes in our area - so our assessment in reality is lower than our building cost and lot cost combined by almost 20%. I at one point contemplated having the lot re-assessed at a lower amount, due to the continuing decline in our real estate market, but since there are very few lots, and no recent comparable lot sales, beyond ours, I don't think that would have done much.

    As it was completed just as our local market turned upwards again - we now have a reasonable tax value for the future that can't be changed upward much due to Prop 13. As it stands we will be paying over $10,000 per year.

  • thisishishouse
    11 years ago
    last modified: 9 years ago

    Not sure how to verify this, as I'm sure that tax assessors won't divulge their secrets. And I'd bet tax laws vary from place to place, so YMMV.

    I was told some years ago by an aquaintence building a home that the roof style could greatly affect the taxes. A 2-story Cape Cod style home is considered a 1.5 story structure. The upper floor sq ftage would only be calculate at 50% towards total space. Likewise, a Dutch Colonial, Gambrel, or Mansard would be considered a 3/4 story.

    Also told that in our area (MA) basements are not taxed as living space. Even when they're walk-out and fully finished. I've seen homes with huge basement rec rooms, theaters, & gyms that don't get taxed a penny.

    Likewise, unheated spaces, like a 3-season porch, or unheated 4-season porch, aren't taxed.

    The aforementioned aquaintence incorporated all such features in their build. I never followed up and asked about the tax bill, or if its truly lower than neighboring properties.

  • brickeyee
    11 years ago
    last modified: 9 years ago

    "It's just that there is no particular reason that it will cost 30% less to run the town just because home prices fall 30%. "

    What would you do if your income fell by 30%?

    Keep spending at the same level?

  • mtnrdredux_gw
    11 years ago
    last modified: 9 years ago

    I am not sure why I am in the position of defending town and cities, but here goes.

    If my income fell by 30% I would still buy things I considered necessities --- food, shelter, health insurance, tuition etc. I would cut back on some things, yes, but probably not reduce my expenditures by 30%.

    Presumably a lot of twon service may be "necessites", admittedly a charged word.