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Tax Assessments Of New Housing

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Sean Wagle

Sophomore Member
Joined
Apr 18, 2003
Professional Status
Banking/Mortgage Industry
State
North Carolina
I was thumbing through my local foreclosure listings, and was curious how could some properties can be going to sale with big mortgages above tax value. Extremely unusual things, like mortgages of $150K on assessments of $70K. How could anyone get into such a situation?

Seems like it's often on new construction... I.e. House sold from builder to an investor at 110K, then to a buyer at $140K a few months later on a zero-down. Foreclosure within 2 years.... penalties and trustees fees exceeding the meager equity they have, and the bank gets stuck with it for $150K.

Certainly, I can see that somebody overpaid for the house. But I'm wondering if tax assessments tend to be on the low side for new construction, which makes this situation look more out of whack than it really was.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Investor games. Watch out for those sales! Just don't be the appraiser using them as comps without double checking on the motivations of and how 'well informed' the buyers really were.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Originally posted by Sean Wagle@May 28 2003, 07:24 PM
Certainly, I can see that somebody overpaid for the house. But I'm wondering if tax assessments tend to be on the low side for new construction, which makes this situation look more out of whack than it really was.
Sean,

I can't speak for new construction, since it's almost come to a dead stop in my area, but I can tell you what little faith I once had that tax assessments are equitable or even remotely fair has recently gone straight out the window.

I would encourage all appraisers to think twice about ever putting any weight on assessed values when they're doing an appraisal.

Many of the counties in and around Denver are seeing huge budget deficits, laying off government workers, eliminating jobs, closing public offices and consolidating to make up the difference. At least one county I'm aware of has jacked up property taxes to a point that is beyond belief. It's not uncommon for homeowers to see assessments that are well above what they could ever possibly sell their homes for.

Imagine recieving your newest assessment and finding that the county has over-valued your home by $100,000! This is not uncommon, and believe me, they're lining up at the assessor's office with protest appeals. We've got some very p*ssed off taxpayers here.
 

Jo Ann Meyer Stratton

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Arizona
It could depend on the property assessment and taxation laws of your state. For example a home that was 50% constructed on September 1, 2002 and completed 100% by November 30, 2002 in Arizona will be taxed a very small amount on the 2003 tax roll, based on 50% complete. September 1 each year is the cut off date for the assessor's offices to pick up any changes or new construction for the next tax year (calendar basis). The home would not be totally taxed until the 2004 tax roll after the assessor's offices determines that it is 100% complete as of September 1, 2003. Since the tax becomes a lien on January 1 but is not billed until October 1 each year, that house will be two years old before a full tax bill is available. In the larger counties, that 100% completion might not even be picked up for another year or two and the 50% never picked up. Some states also utilize the fiscal year basis for taxes and assessments. So it all depends on the laws of your state!
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Interestly, I just ran into one where the assessor was carrying the property at$110,000. When I questioned him on this his reply was.....it's agricultural zoned thus gets a lower valuation. Seems if the property was zoned residential it would be valued at $260,000 to $280,000. The owner thinks the market value is around $350,000.

This is going to be a night mare appraisal. First of all it is a 1250 square foot house on 35 acres 4 miles off the nearest county road. Then it is zoned Ag. Not enough money in world to do this one.

Our county was just revalued for assessment purposes, happens every two years. If any thing, the values are high...not low.
 
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