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Time to assess your assessment: Assessed value vs. market value.

Take a moment to review your December tax bill. How does your assessment match up to your property market value? Are you paying too much or too little for real estate taxes?

It's the most wonderful time of the year ... immediately following all the holiday greetings comes an envelope from city hall....your new tax bill & assessment for Fiscal 2012!  While it’s tempting to file it with the other bills, January is the perfect time to examine bottom line as well as all the other details that combine to produce your annual tax bill.

In Reading, we have a new higher tax rate for 2012.  You can verify how your annual tax bill was calculated by using the following formula ($1000 of value multiplied by the current tax rate = your total real estate tax.) Since all property owners pay the same rate in Reading, the key value to look at is the assessed value.   How does it match up to what you think your property is worth? 

As I like to tell my real estate clients, the only time to be happy about a robust assessment value is when you are about to sell your home.   Widespread  misunderstanding of assessment value among buyers and sellers means that they mistakenly assume that the "listing price" for a home should be relatively equivalent to the assessed value.  In a perfect world this might be true - but more often than not the assessed values do NOT equal the current market value  of a home.

Why not?  Lots of reasons, but most stem from: missing data, old data, and bad data.  The first being that if the town appraiser has not toured your home recently - then the tax valuation is nothing better than a guess based on general neighborhood sales.   Most people never schedule a home visit and therefore assessed values can easily diverge from true market value.   As a Broker, I know that I can’t provide an accurate opinion of value from a drive by; an interior look is always necessary to pinpoint market value.

The second reason has to do with the assessment process itself.  In Massachusetts, the assessment process is governed by state law.  State law says that assessed values should be based upon arms length sales from the previous calendar year.  Given that the fiscal year starts on July 1st, this means that assessors are using sales data that is a minimum of 6 -18 months old and sometimes older.   A recent conversation with our town assessor revealed that for some properties they were forced to go back to 2010 for comparable sales data.  Suffice it to say that a lot can happen in real estate in 18 months.  

Finally the third factor that creates disparities in assessed values are clerical errors – bad data.   As a homeowner, you may want to visit the town website and verify that the assessor has correctly recorded key data points such as total living area, style of home, lot size, number of bedrooms & baths.   Adding or deleting a bedroom, for example, will change the "comps" for the home and may result in a flawed assessed value.   Do you have the only 30 year old home with original kitchens & baths in a neighborhood where the rest of the homes have undergone significant renovation and enlargement?  If so, your assessment may have crept up with the Jones’ – but the home’s true market value may have not kept pace. 

So what can a property owner do if they think their assessment is too far out of line with current market values?  From now until the tax bill is due on Feb 1st, any property owner may appeal their assessment value.   The process involves formally requesting an appeal through the town assessor, gathering proof in the form of a Broker Price Opinion or recent professional appraisal, schedulng a visit to your home for the town appraiser, and presenting your case at to the Board of Assessors at a scheduled hearing.  You may also check your assessed value against similar homes by looking up properties on the town website.  All assessment values are available for public review by address.

While it sounds like a lot of effort – with today’s real estate values and increasing tax rates, successfully challenging an inflated assessed value can result in a significant tax saving in future bills.  The goal for the assessment process is to fairly distribute the tax burden based on values that are as close to true market value as possible.   No one should feel shy about speaking with the town assessor and filing an appeal, if they believe their property value is significantly over or under assessed relative to the similar properties.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

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