My Home Is Worth What?!
Saturday, February 7, 2009
With property values dropping and personal budgets tightening, the new tax assessments arriving in mailboxes throughout the Washington region are drawing close scrutiny from homeowners. If early appeals are any indication, more people will be seeking to get a break by having their home valuations reduced.
However, assessors point out that a stumbling real estate market may not translate to lower property taxes.
Appeals are already up sharply in Maryland, officials said. Assessments were sent Dec. 31 to Maryland homeowners whose properties were up for reevaluation. They have until Friday to appeal for this year. Most Virginia cities and counties and the District will mail their notices by March 1, and they generally give homeowners 30 to 45 days to appeal.
Some of the most headline-grabbing real estate trends, such as the soaring foreclosure rate, only indirectly affect assessments. Assessors usually review home sales records neighborhood by neighborhood and examine pricing patterns to update individual home values. They disregard homes that were foreclosed on, sold at fire sale or otherwise traded hands under what is considered to be duress.
But such transactions tend to pull down values of sales around them, and that shows up. Assessors say they are well aware that real estate prices have been falling and have built that into their latest valuations. For instance, in Fairfax County, officials estimate that assessments for the 340,000 homes on the tax rolls will decline by 10 to 14 percent this year. In the Sterling district of once-booming Loudoun County, the value of existing homes dropped an average of 31.1 percent. There, the trend is so disturbing to homeowners that some who are trying to sell have been calling the county assessor's office, complaining their valuations are too low.
However, it's much more common for homeowners to argue that the values are inflated.
Appeals of current assessments are rising, and they tend to flow in greater numbers as the deadline approaches, said John Brennan, supervisor of the Montgomery County office of the Maryland Department of Assessments and Taxation. The parts of Montgomery County that just received assessments saw valuations go down 16 percent, the steepest drop in the state.
In previous years, about 5 percent of homeowners who appealed saw some reduction in their assessment. Now, "a pretty fair number of those will get market adjustments because the market has come down," Brennan said. "But what a lot of people won't understand is that even with the reduction in their values, it might not have any effect on their tax bills."
That's because assessments are only part of the tax equation. Another part is the tax rate used to calculate the total due. Budget-strapped governments are still grappling with where to set rates for tax bills when they send them out this summer.
Assessment caps are another reason tax bills might not drop as much as property values have. The District and many Maryland jurisdictions cap assessments to varying degrees; Virginia does not. The caps serve to spread out over several years the higher assessments that occur during periods of rapid real estate price inflation. That prevents dramatic upswings in tax bills in any one year but also dampens the effect of lower valuations.
Cindy Smith-Page, director of real estate assessments for Alexandria, will mail new assessment notices to about 45,000 homeowners in mid-February and is expecting a higher volume of appeals.
"People will be anticipating a greater decline in the value of their homes than we've seen already," she said. "Just with the financial constraints on so many people these days, I think everybody's paying closer attention to all their financial issues. And certainly how much they are paying in property taxes and their ability to do that is at the top of their list."