It’s that time of year when the county assessor sends notice of your estimated home value as of Jan. 1.
This year, your assessed home value may increase more than the normal 2 percent if it was lowered at anytime over the past few years. Why? Because when Proposition 13 passed in 1975, it created an assessed value ceiling of 2 percent of the prior year’s factor-base-year value (the accumulation of 2 percent increase from the sale price, in most cases).
However, the county assessor does not have to raise your assessed value by 2 percent automatically. In fact, when home prices dropped a few years ago, many counties reduced the assessed values of homes to match the change in market value. But the factor base year still remains in place. When market values increase above the 2 percent ceiling, the county can raise the assessed value any amount up to the factor-base-year ceiling, which can mean a large increase to the assessed value of your home.
So what does all this mean? According to Proposition 8, also passed in 1975, you have the right to appeal the county-assessed value if you believe that the market value is less than the assessed value. Most counties use a computer program to calculate the estimated value with a wide range of factors. Like any computer program, it does a good job under most conditions. While there are instances in which a software program may create an inflated assessed value, most times the county software calculates a fairly assessed value. When doing a mass evaluation of all the homes in the county, however, there are bound to be some errors.
Assessing your assessment
How can you tell if the county’s assessment is accurate? Remember, the assessed value is the county’s opinion as of Jan. 1, 2014. You should research comparable homes in your area that sold within the past year and no more than 90 days from Jan. 1. The closer the comparable home sale is to Jan. 1, the better the estimated value. Home sales after 90 days (or after March 31, in normal years) cannot be used as comparable home sales for this tax year.
Say, for instance, that an identical home next door sold for a lot less than your assessed value. You definitely have a case for a reduction, right? Not so fast, Dr. Watson. Just because a home sold for less does not mean that it’s a fair-market transaction. If the home was owned by a bank or foreclosed on, the sales price is often not a fair-market value. A partial transfer of title between two parties is not an arms-length transaction and likewise not fair-market value. The home sale should be between two individuals in an open-market transaction.
So do you hire an appraiser to figure this out? It depends. A real estate agent may be able to provide recent comparable sales. Online tools such as Zillow.com or PropertyTaxValidator.org – which provides references for appealing the assessed property value – may give you some idea of your home value. But websites use computer programs that have their own problems. You can also use the county website to uncover more information.
The challenge for homeowners is understanding the process. It may be worth finding someone to navigate the entire appeal process effectively from start to finish.
Bottom line: Conduct some research on comparable home sales or find someone to help you. You may find that the assessed value is overstated and a reduction is due.
Michael McTighe is a Los Altos resident and a property tax agent who assists homeowners in reducing their homes’ assessed value. For more information, visit hometaxexperts.com.