Recently a client emailed me a great question that we felt many people would benefit from knowing the answer to.
“Marco, I recently received a tax assessment notice in the mail and it showed my condo value has gone down since I bought it earlier this year. But I'm seeing condo prices in the area are increasing. Should I appeal to the tax assessor’s office to increase my tax assessment to be more in line with recent market sales, as I'm afraid this might hurt my condo's value now and in the future? I realize this might mean my annual taxes may go up, but I'm just not sure what is best.”
Great question!
For background, the King County Tax Assessors office has the duty to assess property value for the purposes of determining the correct amount of property taxes to collect from a home owner according to whatever taxing district a condo is in. Because some ballot measures are specific to cities, counties, and even within the same city, certain Improvement Districts can be established and taxed differently. So their job is not easy. For example condo owners who live near the Seattle Street Car line had to pay an amount to fund the construction of the street car when they purchased their new condos. For example, Enso and 2200 Westlake had to pay that tax, whereas other condos in the area did not have to pay it. Although this is not a permanent tax, the example still applies. Because of this the tax assessment process is not an easy undertaking and is confusing quite frankly. The tax assessor office’s job is not to determine property value for purposes of real estate market value for purchases and sales of condos. Because of this, it widely accepted that tax assessed value and real estate market value are not one in the same. In fact very rarely will they match, or even come close to it. Back in the heated markets of 2006-2007 it was common to see condos selling at 120-130% of their tax assessed value, whereas during the recent lull condos were selling equally far below their tax assessed value.
Recently I hear the tax assessor has received pressure to "adjust" the assessed values down to be more in line with the current economy and real estate market locally, and I too, along with several of my clients and colleagues have received tax assessment notices where it indeed was also lower than the previous years. So perhaps this is in response to countless people appealing their tax assessments down. One can only assume.
Further, when a condo is purchased neither the real estate broker nor the buyer's appraiser will weigh the tax assessed value very high if at all, when determining the market value. This is because the tax assessed value is really only as accurate as how recently the condo was tax assessed and whether that assessment takes into account the important factors that determine a condo's market value such as location, view, interior conditions, recent upgrades/remodels, building amenities, health of the HOA, etc.
So to my wonderful client, we'll call him "Mr. Underassessed", I would not do anything other than enjoy the fact that, for now, you'll be paying less property taxes, but as the market continues to improve in the coming years, Mr. or Mrs. tax assessor will circle back at some point and you'll start to see that property tax amount increased. In the meantime if you did sell, rest assured your condo would be valued based off of current real estate market value and the recently sold comparable condos in your immediate area that were similar in location, size, building type, condition etc.
By Marco Kronen with Seattle Condo Review: A guide to Seattle Condos exclusively for buyers and sellers
I think this response is a little simplistic. The question really seeks to know if the assessed value may impact some future sale price. And the answer to that is yes, particularly if the sale is in the next year. Buyer’s will consider the assessed value as will bank property appraisers in determining the market value of the property. Obviously, it is just one factor and not controlling. Assessed values can be grossly off, either too high or too low. Seattle condos have declined significantly in price — particularly in 2011 through Feb. 2012 that was even more than 50%. The newest King County tax assessments are supposed to be based on the value on jan. 1st, 2012. The tax assessments on Seattle condos tend to be too high right now because the County is trying to maintain tax revenues in a declining real estate market.
Hi Xizor, thanks very much for your comment. I agree that my answer might be a bit simple, but since everyone’s situation is different with regard to when they might sale, I think it still holds true that, generally, tax assessed values are, as you
suggest, just one factor and not controlling when determining real estate market value. I also concur the tax assessor office is trying to maintain revenue so it is indeed a complicated answer with many variables. Thanks again!
Marco Kronen, Broker
Windermere Real Estate- Capitol
Hill
http://www.urbanmarco.com
[email protected]
206.324.8900- Office
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