New Development Questions

[PerryChase]

Here are some questions for people knowlegeable with entitling land for new developments.

Say you buy a parcel of land for development. Prior to your puchase the land was assessed a certain value for property taxe purposes. Now your new property tax is based on your purchase price.

Then you subdivide the land and submit a condo map. Is that land reassessed at that time to a new basis?

Then you build all the new condos and have them for sale. The County obviously would setup new parcel numbers for the new units. Until you sell the condos, how are the property taxes on each parcel determined?

Say you can’t sell some condos and now offer them for rent. What are your annual property tax basis?

Is that calculated by what you have invested into developing the property? If that is the case, then I assume that the property tax rolls should pretty much reflect the builder’s basis, and anything over and above that is profit.

Do you think that the County Assessor would answer those questions?

[sdrealtor]

Based upon the supplemental tax bills I’ve seen for new construction, my guess would be that they are not reassessed until they are actually sold at a new and higher price.

[PerryChase]

Thanks sdrealtor. Perhaps if a new house is sold upon completion or soon after that, there’s no need to reassess because the new value would be the sale price.

But it doesn’t seem quite fair if a house sits unsold for months, perhaps years. Does that mean that I can buy land, build 10 houses, not sell them, and hardly pay any property taxes?

I build a pool or a balcony and I’m reassessed; shouldn’t I be reassessed if I put a new house on my vacant land?

If you look at a project such at the Loft at 777, you’ll see that this is brand new construction. There are still unsold units (parcels). And if you look at the County records, you’ll see that they have been assessed. Can we assume that those assessed valued is the cost basis for the builder?
http://sdlookup.com/PropertyResults/tabid/58/q/777+6TH+AVE/Default.aspx

For example, look at Unit 207. The assessed value is $323k. If I were a buyer, I’d want to negotiate the price as low as possible keeping in mind that the assessed value is probably what the builder “has into” the property.
http://sdlookup.com/PropertyDetails/tabid/53/forumid/1/view/topics/pid/BCB8FFB5/Default.aspx

If I’m in manufacturing and build a machine for use in my factory, I need to declare my basis in that machine for property tax purposes. I’m thinking is would be the same for houses.

As time goes by, I’m sure that I’ll somehow get the answer and I’ll report back.

[PerryChase]

Look at this spec house in RB. The assessed value on the parcel is $1.12M. Does that mean that this is the builder’s cost basis? The list price is $2.229M. If the assessed value is the cost basis then there’s still lots of room to negotiate.

http://sdlookup.com/PropertyDetails/tabid/53/forumid/1/view/topics/pid/3A679103/Default.aspx

http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=061071683&page=2&property_type=SFR&mls=mls_sandiego&cKey=t6j36vt8&source=SANDICOR

[PerryChase]

Look at this loft Downtown.
988 G ST #34, SD – Downtown, CA 92101**
The current assessed value is $82k. If the builder decides not to sell and moves into the unit, will his taxable basis be $82k? Doesn’t see quite fair… Maybe the County Assessor is not doing his job.

http://sdlookup.com/PropertyDetails/tabid/53/forumid/1/view/topics/pid/4B4B917F/Default.aspx

http://www.ziprealty.com/buy_a_home/logged_in/search/home_detail.jsp?listing_num=066100745&page=8&property_type=CONDO&mls=mls_sandiego&cKey=65dxrq7g&source=SANDICOR

[VanMorrisonFan]

Properties are generally taxed at their cost basis, unless the cost of the property was artificially low, as it might be in a transfer between related entities, a foreclosure sale, or an auction.

Let’s say you buy vacant land for $500,000 and subdivide it. If there are significant costs in subdividing the land (i.e., putting in streets, utility lines, light poles, etc.) then those costs get added to the sale price of the land to determine the new assessed value.

Now let’s say you build five houses, and the cost is, say, $1,000,000. The tax basis of the property is the original purchase price ($500k), plus the cost of subdividing the land, plus the construction cost of the homes.

Assessors typically base the construction costs off of the information that the developer used when applying for his building permit, but they aren’t required to do this.

Sometimes assessment lags the development process, especially in a booming market. Assessors always complain that they don’t have the staff needed to stay current on all the development activity.

[PerryChase]

Thanks VanMorisonFan. Your explanation is how I expected the process to happen.

In surfing properties, I’ve noticed many cases of the assessment lag you’re talking about. It looks like the Tax Assessor/Collector is leaving money on the table, in which case we are all subsidizing developers.

But builders will tell you that they pay enough in development fees already — which they pass along to homebuyers.

I’m also sure that there are many cases where the Assessor “forgets” to properly reassess new contruction (e.g. Duncan Hunter’s house).

[PerryChase]

Here’s an article about Greg Smith, our County Assessor. Is he on the side of the taxpayers or on the side of the developers? His wife is a Realtor. He’s not getting my vote.

—————
“It’s a buyer’s market,” says Greg Smith, “period.”
Greg Smith, county assessor/recorder/clerk, is delivering a clear message: Now is the time to buy a home in San Diego.

This real estate booster isn’t an agent or an analyst. He’s Greg Smith, perhaps San Diego’s most obscure politician. But that doesn’t mean he’s quiet.

The emphatic Smith has undertaken a “no-bubble” campaign to tout what he sees as a vibrant housing market at a time of great uncertainty in the industry. He speaks two to three times a week to community groups, such as Rotary clubs, and real estate industry groups. The message he proclaims: now is a good time to buy in San Diego.

“I think the fundamentals are strong,” he said. “We don’t have a recession, we have job growth — I don’t see the dark clouds out there, I really don’t.”

http://www.voiceofsandiego.org/articles/2006/08/07/housing/970smith.txt

[SD Realtor]

PC I could never see a case where Mr Smith would discourage buying… Think about it… just for starters if he acknowledges a depreciating market, he opens the floodgates for people (new homeowners) to apply for reassessments.

I bet many people who bought a home or ESPECIALLY a condo in late 04 or early/mid 05 could save some money on thier property taxes if they applied but they don’t even know that.

SD Realtor

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