Raising Taxes Based on Purchase Price

[Matthew Shay]

Which states raise taxes based on the purchase price of real estate? I saw somewhere online that California is one of them. Is there a difference among the different classes of real estate i.e. multifamily vs. single family? 

This has a tremendous impact on cap rate and I read a story where a client had an accepted offer to be used for 1031 exchange, only to find out during due diligence that the listing agent put the lower cap tax value in the listing expenses instead of the actual and relevant current value. It ended up being a disaster for the client because he had to back out of the deal to buy another property and still paid capital gains tax. Moral of the story, do your due diligence and assume that the cap rate that the seller gives you is higher than it is