Keep Your Low Tax Assessment

I love it when people email to ask questions — sometimes I have the answer and sometimes I don’t.  Which gives me an opportunity to do a little research, educate myself and then share that information. So, keep the questions coming!

But for today, I wanted to share an interesting question I got recently.  Very often, people ask about the value of their home and how that is affected by their “tax valuation”.  This specific question, posted by a resident of East Atlanta, was as follows:

“I own a 1954 ranch in the Eastland Manor neighborhood. I bought the home for 199,000 in 2005. It was partially renovated. I have subsequently made over $50,000 in additional improvements [remodeled both bathrooms, waterproofed and finished our full basement]. At some point in the next few years, I will be looking to sell. My question has to do with the property tax assessment I received in the mail this weekend. Dekalb County has assessed our home at $108,000. Should we appeal this value as too low to protect our property’s value? Or should we enjoy the lower taxes? Does the assessment matter?”

This is a great question.  Let me start by giving the simple answer:  ENJOY THE LOWER TAXES!

Now that we got that out of the way, let me expand just a bit.  There are really several different ways to “value” a home.  As REALTORS, we look at market value (usually called a CMA) — this is what we think a buyer would be willing to pay for the house.  This takes into account many factors, some of which are objective (like square footage, bed/bath count, does it have a garage or basement, etc)  Some of which are more subjective (is it on a “good street”, can you walk to shops and restaurants, can you walk to the park, bungalow vs. ranch style home, etc).  To do a good CMA, a real estate professional should know an area well enough to know how those subjective or “emotional” factors affect the market value of a home — that is, what a buyer might be willing to pay.

My last post was about appraised value, which is a whole different ballgame.  I won’t rehash that information here.  But, to summarize, an appraiser will typically weigh more heavily on the objective critera and a little less on the subjective (because they have to be able to defend their appraisal and too much subjectivity is hard to defend).  For example, I had an appraisal on a property recently where a buyer and seller agreed on $273K purchase price for a 3BR/2BA renovated home on a great street walking distance to shops, restaurants and the neighborhood park.  An appraiser used comps that were 1/2 mile away in a part of the neighborhood that isn’t  nearly as desirable.  Not only is is not walking distance to the business district, but there aren’t as many renovated homes and it is perceived as a “sketchy” location (by those “in the know” about the neighborhood).  The appraised value came in at $255K based on those recent sales.  The comparable sales (and I use that term loosely), were similar square footage and renovated homes, but the difference in location wasn’t even on the appraiser’s radar.

Another type of valuation is online computer estimates such as Zillow, Yahoo, HomeValues, etc.  If you saw my last post about “Zestimates”, you know my feeling about this method of property valuation.  These estimates are notoriously inaccurate and hold little relevance in determining a home’s value.  They do not take the condition of a property or any subjective criteria into account in determining value.  So, let’s just agree to toss these out and ignore them.

The tax assessor’s office uses a system that is little better than these online computer estimates.  Granted, they do have actual appraisers, but they rely heavily on a neighborhood’s sales stats and computer models and averages.  The tax appraisers rarely set foot in a property to think about the subjective criteria and at best they make a guess at the property’s condition.  The exception to this might be if a tax valuation is appealed, in which case an appraiser may actually come to the property to look at it and make a valuation.  For this reason, the valuations are often higher or lower than what we would consider the “market value” of a home.  In defense of the tax assessors office, they don’t have the resources to do a true, on-site appraisal of each and every home in the tax base, so we can cut them some slack.  They rely heavily on the computer models and then homeowners can appeal if they feel like their property has been valued too high.

So, CMA and true on-site appraisals are the two main types of property valuations that will affect your “sale price” when you sell your home.  Your tax valuation will certainly be a factor if it’s high, because the taxes will be high for a prospecive buyer.  But, if you’re lucky enough to be under the radar with the tax assessor’s office, enjoy it!  They’ll find you some day and find a way to squeeze out some tax dollars from you.  But, in the meantime, don’t worry about the affect it will have on your home’s market value.

posted: Jun 3, 2011 | No Responses

Posted by:  Wakamo & Associates

Melissa Wakamo and her dynamic team of agents and support staff provide buyer and seller clients with exceptional service and proven results. Since the start of her real estate career in 2004, Melissa has proven to be a true advocate for her clients and has consistently performed in the top 1% of agents

“When I started my real estate career, I wanted to work in my local community and get to know my neighbors. Now, I realize how important that local expertise is to our clients. At Red Robin REALTORS®, all of our agents are specialists in working with buyers and sellers in Atlanta’s intown neighborhoods.”

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