I’ve got a dumb Property re-assessment question

[pencilneck]

I purchased a fixer-upper in 2010 for $300k. The property had once been assessed as high as $340k for a prior owner who inherited the home in more bubbly years. I assumed that the assessed value of my home was reset to $300k at the time of purchase, which is what the tax documents say. I don’t immediately see anything other than this.

(Also, thanks HLS! Awesome broker)

Today I received a letter from the county tax assessor that my “temporary reduction” is over, and that my property’s new assessed value is $313k. Their reasoning is that: “State law allows for a temporary reduction in assessed value (base year value) when the market value of a property falls below its assessed value.”

I believe I should challenge.

Before I challenge the re-assessment, I’d like to ask a few questions to those smarter than I:

Am I missing anything? (I am quite good at missing things)
How do I verify my real assessed property value vs. my alleged reduction?
What evidence other than closing documents might I need to contest this?

[EconProf]

I am not sure from the data you reveal, but it seems the property got a temporary assessment reduction while either you or the previous owner owned it. It doesn’t matter, the Assessor has the right to now “catch up” with the market value if it is rising rapidly. In other words, the 2% per year Proposition 13 rule does not apply yet in this case.
Now if you bought it for $300k in 2010 and the Assessor now wants to tax it based on a value of $313k, it seems to me you have a good deal since properties have appreciated so much since 2010.
If you think you are overassessed, would you consider selling the property at $313k?

[livinincali]

If your time to fight the tax assessor is worth less than $162.50 then sure.

[SK in CV]

[quote=EconProf]I am not sure from the data you reveal, but it seems the property got a temporary assessment reduction while either you or the previous owner owned it. It doesn’t matter, the Assessor has the right to now “catch up” with the market value if it is rising rapidly. In other words, the 2% per year Proposition 13 rule does not apply yet in this case.
Now if you bought it for $300k in 2010 and the Assessor now wants to tax it based on a value of $313k, it seems to me you have a good deal since properties have appreciated so much since 2010.
If you think you are overassessed, would you consider selling the property at $313k?[/quote]

Not exactly right. Any temporary reduction during the previous ownership is immaterial. The property was reassessed upon change of ownership. The “catch-up” can only relate to the current ownership. With a cap of 2% a year increase, the max increase over the roughly 4 years of ownership is about $24K. (It may be only 3 years, depending on the exact dates of transfer) Even with the increase to $313K, the current owner’s assessment increase is only about 1/2 of the maximum allowed.

[pencilneck]

Thanks Sk! Very good explanation.

I still didn’t really get it until I saw a chart that illustrated what you were saying. But you were spot on.
http://www.stancounty.com/assessor/pdf/prop8-13.pdf

[bearishgurl]

All the Prop 8 letters in SD County were mailed last Fri/Mon.

SK is correct that prop 8 adjustments (up/down) only apply to the current owner. They have nothing to do with what the assessment was under a previous owner or if the last most-recent owner received any Prop 8 adjustments themselves.

pencilneck must have gotten a downward assessment (from the $300K he paid) AFTER he purchased it (possibly right after his supplemental bill was mailed).

pencilneck, if you look thru your old tax bills, you may find that in FY 10/11 or 11/12, your assessment went down below the $300K you paid. You likely weren’t aware of this because the assessor may have adjusted assessments downward on several recently-purchased properties on your parcel map and adjoining ones.

I got a Prop 8 letter as well on Tuesday, as likely did most of the “recent” buyers in my area – in the last 15 yrs. (Purchasers since about ’99 are “recent” for a 65 yo neighborhood.) This is due to the Co Assessor doing mass reductions in assessments for the 2010/11 fiscal year in my area to prevent more assessment appeals, which they didn’t have the personnel to handle (a county appraiser actually told me this on the phone).

My assessed value is now just under its 2003 assessment and so I can’t argue with it.

[pencilneck]

Bearishgurl,

Thanks! However, the tax assessment never changed. $300k every year.

My interpretation of Prop 13 was that they could only raise property assessments 2% annually. I was surprised with the notice of an increased assessment of over 4% in a single year.

According to Stan County document I linked earlier, the 2% increased assessment ceiling occurs every year, whether or not property appreciates or depreciates. Does this sound right?

[bearishgurl]

[quote=pencilneck]Bearishgurl,

Thanks! However, the tax assessment never changed. $300k every year.

My interpretation of Prop 13 was that they could only raise property assessments 2% annually. I was surprised with the notice of an increased assessment of over 4% in a single year.

According to Stan County document I linked earlier, the 2% increased assessment ceiling occurs every year, whether or not property appreciates or depreciates. Does this sound right?[/quote]

Yes. That is correct. But you just said your $300K assessment has not changed since you got your first full-year tax bill (2010/11 fiscal year?)

Your assessment should have gone up 2% per year in accordance with Prop 13. HOWEVER, apparently the assessor in your case decided to leave your assessment the same as your purchase price, that is, until FY 14/15, for which you just rec’d your Prop 8 letter.

Your total assessment (of land + improvements) should have been (approx):

For FY 2010/11: $300,000
For FY 2011/12: $306,000
For FY 2012/13: $312,120
For FY 2013/14: $318,362
For FY 2014/15: $324,730

So, unless you’re sure you can’t sell your property today for $313K, then don’t worry … be happy. You’re still getting a break and may get another Prop 8 letter adjusting your assessment as high as $331,224 next July (for FY 2015/16) :=)

[bearishgurl]

Here is the answer to your question (from the horse’s mouth):

http://www.boe.ca.gov/proptaxes/faqs/prop8.htm#5

Also see:

…The property may be reassessed under certain conditions other than a change of ownership, such as when additions or new construction occur. The assessed value is also subject to reduction if the market value of the property declines below its assessed value, for example, during a real estate slump. Reductions of property valuation were not provided for by Proposition 13 itself, but were made possible by the passage of Proposition 8 (SCA No. 67) during 1978 which amended Proposition 13. Such a real estate slump and downward reassessments occurred during 2009 when the State Board of Equalization announced an estimated reduction of property tax base year values due to negative inflation.[10][11] Property tax in California is an Ad valorem tax meaning that the tax assessed (generally) increases and decreases with the value of the property.

http://en.wikipedia.org/wiki/California_Proposition_13_%281978%29

[EconProf]

[quote=pencilneck]Thanks Sk! Very good explanation.

I still didn’t really get it until I saw a chart that illustrated what you were saying. But you were spot on.
http://www.stancounty.com/assessor/pdf/prop8-13.pdf%5B/quote%5D
Pencilneck:
That explanation and graph is a very good description of the law. I recommend it to everyone confused by Prop 13.
Now, the question you have not yet answered: what is your property really worth?

[Author]

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