Property Tax Value

[Denny Pugh]

I am in North Carolina. I have a chance to purchase a property at 50% of current tax value. Both the owner and I agree that the value it is way to high based on recent comps in the area. Is the county under any obligation to reduce the tax valur based on tha sales price ??

JDPugh

[Richard Sanderson]

Denny:

As Steven Hamilton said, different counties have different procedures. State tax laws govern property tax assessments in the U.S. and only a handful of states adjust an assessment based on sale price alone. But you should always keep the following in mind when it comes to real estate assessments:

1. They always have an "effective date for valuation." Similar to a stock price or appraisal, the assessor's value is as of a specific date. You may be surprised to find that the 2012 assessment is as of December 31, 2011, or January 1, 2012.

2. The assessed values are based on sales during a specific time frame BEFORE the effective date for valuation. For example, 2012 assessments may have a January 1, 2012, effective date for estimating value based on sales during a 12 month period from July 1, 2010, through June 30, 2011.

3. When selecting comps (as Harry M. mentioned) be sure that you chose them for the same time frame used by the assessor. Most assessors and review boards will reject sales outside of the time frame studied for the assessments.

4. As long as the assessor has prepared all of the assessments using the same methodology, this system is considered fair and equitable. It works best when prices are rising. Remember years ago when you wondered why assessments were so far behind the rising market? Well, this time delay is why they are taking so long to reflect the downturn in the current market. Assessors need this lead time between studying sales and sending out assessment notices because they are valuing EVERY property in their community, not just the ones that sold.

5. Assessors are typically required to have the assessments reflect market value or some percentage of market value (true value, fair value, etc.). Most definitions of market value assume a willing buyer and willing seller, neither under duress. As such most assessors ignore foreclosure sales, bank-owned property sales, and other sales under duress. Most assessors will only consider sales under duress if these kinds of sales are the prevailing market conditions (that is a high percentage of sales during a given year are sales under duress).

6. As Harry M. said, show the assessor or review board a list of needed repairs or actual property features that are substandard. Assessors records typically assume normal wear and tear unless a building permit is issued for repairs or it's placed on a "unfit for habitation" list.