The property tax assessment on your real estate could be growing progressively out of touch with reality, particularly if your community doesn't factor "creative financing" into its computations.

You may be $10,000 to $50,000 overassessed on your house or condo right now. Your assessment may have moved up by 10 percent in the past two years, while real-estate values on your street remained flat at best or declined 5 to 10 percent in real dollar terms.

That's not idle speculation, either. It's the opinion of many real-estate appraisers and property-tax assessment officials around the country, some of whom are pressing for major reforms in assessment methods in their states.

The professional group that represents over 8,000 property tax assessors and appraisers, the Chicago-based International Association of Assessing Officials, thinks the problem is so great that it's devoting a big chunk of its annual convention in October to figuring out ways to solve it.

The problem, plainly put, is that home real-estate prices in the past two to three years have been distorted by unorthodox financing methods. Roughly 70 percent of home resales this year nationwide will involve some form of creative financing, ranging from cut-rate, seller takebacks to wraparounds, non-amortizing three-year balloons and other exotica.

Most of these techniques enable sellers to get the price they want, but only in exchange for financing terms that subsidize the buyer's costs by hundreds or thousands of dollars a year. Buyers will agree to continue paying high prices for homes as long as those prices come with large discounts built into the deal by way of mortgage money concessions.

In short, creative financing sells houses, but it can also mask reality. The cash price of a home near you may be $75,000, for example. The selling price of the same home with an assumable 7 3/4 percent FHA first mortgage and a large seller takeback second loan at 10 percent might go as high as $95,000.

Five years ago the financing attached to a home wasn't a key element in its sale price. Today the financing often determines the selling price.

The impact of this rapid change in the marketplace on the fine art of real-estate appraisal has been catastrophic. Large numbers of local property assessment systems, operating under tradition-bound state laws, take scant notice of financing. They emphasize comparable selling prices within neighborhoods. They look at the bottom-line figure on the recorded sales transaction, not the mortgage machinations that went into it.

But that blindness to financing reality is beginning to land some assessors in hot water. Homeowners socked with rising assessments in stagnant markets are threatening court action to get their tax bills slashed.

Take the case of Raymond Bowie of Fairfax City, Va., for instance. Bowie, a lawyer, bought his subdivision house last September for $129,950. The price he paid, he says, factored in the "cash value" of the highly favorable financing he received.

Bowie assumed a $78,600 VA first deed of trust at 9 1/2 percent and received a 13 percent second trust from the seller to cut his cash investment. The house, however, had an actual cash sale value of about $106,000 to $108,000. That market value was confirmed, according to Bowie, not only by the seller (who was willing to let it go at that all-cash price), but by the 1982 tax assessments of his neighbors.

Bowie's 1982 assessment, however, was $120,900 -- a 26 percent jump on the property in the span of one year, with no improvements added. Bowie challenged the assessment and was told that Fairax's property-tax methods don't take financing factors into account because state law doesn't require it. Miffed, he filed an appeal on behalf of himself and other home owners affected by the city's assessment procedures. Now he plans to file a class-action suit and "fight this ridiculous practice all the way to the Virginia Supreme Court if necessary," he says.

"It's insane to be assessed property taxes on the value of my financing, not simply on my bricks and mortar," in Bowie's view.

Like most communities, Fairfax city depends heavily on local property taxes for its municipal revenue. If the city were ordered by a court to wring out the value of financing from its assessments over the past two years, "we'd be in one heck of a mess," admits the city's chief assessor.

Multiply the Fairfax situation by 15,000 property-tax-levying jurisdictions nationwide "and you see how big this issue really is," says Stuart Miller, a spokesman for the international assessors group in Chicago. "I wouldn't be surprised to see [similar] suits popping up in every town and city." With home sale prices flat or declining in real terms, Miller says, it is "inevitable" that property-tax systems are going to have to give significant weight to financing.

Check out your community's tax methods, like Raymond Bowie did. You may want to reassess your assessment this year or next.