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Special City Tax

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DCSVAL

Sophomore Member
Joined
Sep 6, 2007
Professional Status
Certified Residential Appraiser
State
North Carolina
I'm looking at comps and I 've located one that very similar/dead-on to my subject except its in a historic district of a neighboring town and pays a special city tax of $2800 + another $2000 state/county tax. The subject pays $530 county/state only. What sort of adjustment is recommended? The very few other comps in the market area are pay slightly higher county/state taxes than the subject and do not have the special city tax.
 

Randolph Kinney

Elite Member
Joined
Apr 7, 2005
Professional Status
Retired Appraiser
State
North Carolina
I'm looking at comps and I 've located one that very similar/dead-on to my subject except its in a historic district of a neighboring town and pays a special city tax of $2800 + another $2000 state/county tax. The subject pays $530 county/state only. What sort of adjustment is recommended? The very few other comps in the market area are pay slightly higher county/state taxes than the subject and do not have the special city tax.
You should reconsider choosing as a comparable from a historic district when your subject is not.

Have you asked your mentor about this? What does s/he say?
 

c w d

Senior Member
Joined
Oct 2, 2006
Professional Status
General Public
State
Florida
I'm looking at comps and I 've located one that very similar/dead-on to my subject except its in a historic district of a neighboring town and pays a special city tax of $2800 + another $2000 state/county tax. The subject pays $530 county/state only. What sort of adjustment is recommended? The very few other comps in the market area are pay slightly higher county/state taxes than the subject and do not have the special city tax.

Historic districts are special designations generally registered nationally. Homeowners must comply with certain rules pertaining to their homes in order to preserve their historic architectures. They are very specific markets. As such, I would advise you to reconsider your choice of using a historic district sale as a comparable for a non-historic district subject.

Even if the subject is right out side the boundaries of the historic district, I would not use a sale within it.
 

Kevin A. Spellman

Senior Member
Joined
Aug 30, 2003
Professional Status
Certified Residential Appraiser
State
Massachusetts
There are two communities in my area and they are quite similar, but one sells for less than the other for the entry level homes. The reason is the taxes. The higher taxed community has to sell for less so the applicant can qualify for a loan. We as appraisers do not discuss an applicant’s capacity to qualify, but this is reality. So if the market operated correctly, the property with higher taxes could sell for less.

I would not make an adjustment for the taxes as they could move in either direction. The adjusted indicators of value could demonstrate a difference and a comment about taxes being the difference could be discussed, but a tax adjustment would create a problem.
 

c w d

Senior Member
Joined
Oct 2, 2006
Professional Status
General Public
State
Florida
There are two communities in my area and they are quite similar, but one sells for less than the other for the entry level homes. The reason is the taxes. The higher taxed community has to sell for less so the applicant can qualify for a loan. We as appraisers do not discuss an applicant’s capacity to qualify, but this is reality. So if the market operated correctly, the property with higher taxes could sell for less.

I would not make an adjustment for the taxes as they could move in either direction. The adjusted indicators of value could demonstrate a difference and a comment about taxes being the difference could be discussed, but a tax adjustment would create a problem.

Taxes do affect market value. But, it's not as simple as you present it. In the OP's situation the higher taxes are in a historic district. I'll assume that with the higher taxes are also higher property values due to the historic district. We have two well know historic districts in our city: Riverside and Springfield. The prices of homes in those areas are substantially higher than properties outside their boundaries even though those lower value homes are +/- 10 years newer and have similar and same architectural styles and general are similar in quality of construction. Their values are due to their historic designations and the desirability of the areas due to their designations. I really hope the OP reconsiders using that sale unless he is prepared to make some hefty adjustments for more than just the tax differences.
 

Mztk1

Senior Member
Joined
Dec 3, 2006
Professional Status
Certified Residential Appraiser
State
Florida
Sounds like a location issue to me.

I've been in markets where the taxes are higher on model matches and are worth more than in a neighboring town with the same model where taxes are less because the higher taxed town is preferred due to school districts (paid for by the property tax).

The federal registry for historic districts is, to what I remember, more of an honory acknowledgement. The federal government doesn't have much say in areas unless they are national parks. I suppose there are some there or here that receive federal funds but, to the best of my knowledge, it is the local historic district's bylaws, zoning, etc., that is typically run and set by the local municipality, that determines the extent of preservation, etc. So even going from one town's historic district to another is a bit iffy.

But in my opinion, as long as you have a couple of sales from the subject's historic area and can firm up a good location adjustment, then in that situation where you have no other choice, you can just look to extract that location adjustment and comment on why it is necessary. The higher taxes can be part of the comment.
 

RSW

Elite Member
Joined
Feb 18, 2002
Professional Status
Certified Residential Appraiser
State
Tennessee
I would consider using that sale if it were one of the only three sales available. We have several historic districts here in Knoxville. Homes in those areas tend to sell for much more than homes just outside of the historic districts. Owners have purchased them, made repairs and keeping them in the spirit of the historic district and then re-selling them. I would have to make some sort of location adjustment in order to reflect the difference in value.
 

Mike Boyd

Elite Member
Joined
Jan 18, 2002
Professional Status
Retired Appraiser
State
California
All other things equal (or adjusted to equal) I have found very little, if any, value difference in homes in a historical district than those outside that district.

In reference to taxes, do you mean the annual property taxes or the one time property transfer tax? Most cities, nowadays, (in California) have added an additional city transfer tax on top of the county transfer tax.

Taxes or even assessments do not affect value by themselves. It MAY affect the net proceeds pocketed by a seller when the home is sold depending on whether or not the assessment is paid off per the terms of the purchase agreement. The theory is that an assessment is to pay for some off site improvement that the non-assessed property already has. Thus, there is no value difference. Variations in property taxes might very well go with the owner. for example: Homeowner's exemptions, veteran's exemptions.
 

PropertyEconomics

Elite Member
Joined
Jun 19, 2007
Professional Status
Certified General Appraiser
State
New Mexico
The question is what do the sales tell you? What do comparision of the sales within the district and those outside tell you? Go to the market for your answers and see if there is a difference.
 

DCSVAL

Sophomore Member
Joined
Sep 6, 2007
Professional Status
Certified Residential Appraiser
State
North Carolina
City Tax

Thanks for your input.
 
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