Supplemental tax property tax increase for off market purchase

[Dan H.]

Property is in Escondido, CA.

I have purchased directly from the owner twice prior without getting a supplemental increase to the accessed value for property tax purposes. My off market purchase that closed New Years Eve (Dec 31, 2020) I received an accessed value for property tax purposes of ~$100K over what I paid for the property. I was told this is because it was not on the MLS and therefore susceptible to a state appraisal. I had never heard of such a thing and as indicated I have purchased twice before direct from the owner (once in 1992 and once in 2017).

 I can see getting a different accessed value if I was purchasing from a friend or in some other way was not an arms length purchase.  I did not know this seller and never interacted with this seller except as related to the purchase of his property.  The seller was represented by an attorney that looked after his interests.  My offer had various contingencies removed or reduced including over $100K appraisal gap.  The offer let the seller dictate the closing time (instead of it being short, it ended up being long like 4 months all at the sellers control which long closing presents various issues that needed to be worked).  Prices rose a lot in the time between when the offer was accepted and when the seller wanted to close.

After closure, I had 2 workers work on the place for much of 2 months to get it into its current shape. In general, properties that are off market either are in worse shape or have higher risk that the properties on the MLS. Comparing them to MLS properties is not an accurate comp.

I agree today the property is worth at least as much as the state's appraised value (actually quite a bit more).  This does not reflect the value at the time the offer was accepted.  I believe the value should be based on what the buyer and seller agree to (except for cases where the seller is gifting some value to the buyer or other such relationship based offers).

Has anyone heard of such an increase to accessed value for property tax purposes for offers that are not purchased on the MLS? Is this a new thing? If I had known, I would have placed in on the MLS with it already under contract. They indicated I could appeal the appraised value, but the place has had hundreds of hours of work done to it since purchase and in its current shape was worth at least as much as their value at the time of the purchase (it was not in its current shape at the time of purchase). I also believe the value should not be based on the value at the close of escrow, but the time the property went under contract (Sept).

A value of ~$100K above the paid value is just over $1K extra property tax per year and is not going to hurt this purchase significantly. It just seems wrong that a property needs to be on the MLS otherwise it is susceptible to state appraisal to determine the value for the property tax (in cahoots with RE agents???). It also seems wrong to comp off market properties with MLS properties (It is rare to see an off market property that either does not need a lot or work or has risk items). There is the use of the close date to set the value instead of the date the property went under contract. Final item is concessions in the contract: contingencies removed, seller dictate closing, appraisal gap coverage, etc.

We have been told we have limited time to appeal the state's appraisal.

Thanks for any information anyone has related to this.