Dear PoP – Real Property Assessment Question

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“Dear PoP,

I am considering submitting an appeal on my recently assessed Property Taxes. I am a recent first time home owner, so I am new to the “fun” world of taxes regarding property. I feel that my assessment was quite high. I compared my assessment to every house on the block and I am probably the most heavily taxed on the block (I have the Homestead Deduction, as does 90% of the houses on the block). I bought a 1909 rowhouse that needs quite a bit of work. It is liveable, but needs quite a lot of finesse to make it shine. Of the 24 or so houses on my block, I would say 60% have been renovated nicely (i.e. gutted, updated, etc…), 30% need some work, and the final 10% need substantial work. My property falls in the 30% pool of needing some work. I was shocked to see that the majority of the renovated homes have substantially lower taxes then my house. I called into the DC Real Property Assessment Division and spoke with my designated assessor and he mentioned that my tax assessment was more or less based on other home sales and most importantly my actual purchase price of the house. “Even if that house needs work and isn’t as nice as your neighbors, you paid that much for it, you are going to get taxed about that much for it.”

My immediate thought is I paid $x.xx amount of dollars because that house was worth that much to ME. But how much is it worth to the city? If I felt like paying $1,000,000 for the home, should I get taxed for that amount?

With my house needing quite a bit of work compared to the other “nicer” houses on the block, should I be taxed that much more than them? Avg is a solid $80,000 assessed value more…

Should I submit an appeal?”

You should definitely appeal the assessment in my opinion. I appealed once for a similar reason and won. And also don’t forget to file for the deduction if it is your primary residence. Here is the discussion we had last year. Did anyone’s assessment go up?

47 Comment

  • I’m not sure what the complaint is. If you paid $1M for your house on a block with $400k houses, then that’s the value of your house for whatever reason. You paid X for the property in whatever shape it was when you bought it, so by definition it is worth X. It’s a market, you bought something at the market and paid for it, ergo, it is worth what you paid for it as far as the city is concerned.

    Maybe you like the distressed look, like someone who pays $200 for torn jeans. You might be the only one, but that pair of jeans has that value to you. Why should the city second guess your judgment on value? An actual sale is the only hard evidence of what a house is worth. All the estimates between sales are just rough guesses. The city doesn’t try to figure out why it’s worth that.

    • I tend to agree. If you bought a $200 pair of jeans, you’d be taxed on the $200, not the $30 price for the pair of jeans on the next rack. As Ragged Dog said, it’s the only solid number the city has to hang their hat on…

      • You buy a $200 jeans at 50% off on a sale. Should you be taxed on the $200 or the discounted price?

        The value of the jeans is still $200 for you. You just got it at a lower price.

        • saf

          No it’s not, or you would have bought that at $200.

        • This is a bad point. By the logic of this analogy, you should pay sales tax on the $200 original price tag, not on the sales price. You value the jeans at what you pay for them — the market price. If the store could have sold the jeans for $200, they wouldn’t have been on sale.

          Can you imagine going into Filene’s Basement, buying a shirt that still has an original price tag of $130 for $20, and then having to pay tax on $130, on the argument that that is what it was worth to you?

    • ah

      The price you paid is the best measure of market value, even if it’s imperfect.

      That said, what seems to be the problem here is that your house as been assessed at market value but other houses near you have not–their values have not gone up.

      I had something similar happen when I bought a house. Because we overpaid (it seems) they increased the land value of the house significantly. I appealed on the ground that my land value increased whereas everyone else’s stayed the same. I won on that ground. The next year, though, everyone else’s land value went up too. But at least that’s fair.

      • i guess you should be glad the “stop snitchin” movement hasn’t hit real property assessment…yet.

    • If other houses on your block aren’t assessed at what you think is the fair market value, it could very well be because there’s a limit as to how much DC can increase an assessment from year to year. Kind of like rent control. If your neighbors bought their houses a while ago, the tax value could be well below the fair market value. But you just bought your house, so I agree with those above (and the DC gov) that if the assessment = purchase price, you don’t have much of a case for appeal.

      • saf

        “there’s a limit as to how much DC can increase an assessment from year to year. ”

        No, there’s a limit on how much taxes can be raised, not on the assessment. They raise the assessment, then the taxed value goes up incrementally until the assessed valued is reached.

  • ^ Well, this is not sales tax. What you said is correct if its applied to a sale, where there is a flat tax rate.

    Property tax is assessed on the property, why else would it be called an assessment then?

  • A home purchase is a signal to the city to reassess the value of the property. Unless it is assessed for more than you paid for it, you really don’t have any recourse. Among my home-buying friends, many of us got reassessed for the purchase price of the home, some of us got assessed for a bit less.

    Check also what the condition of your house is listed as – if it is listed as good, you can request it be listed as average or below average. Usually the condition info indicates if you have central air and other main improvements. Make sure it’s noted if you don’t.

    Per this comment “If I felt like paying $1,000,000 for the home, should I get taxed for that amount?” – well, what the buyer is willing to pay is how you determine the fair market value. But I assume you didn’t pay hundreds of thousands extra over what the home was worth just because you felt like it.

  • Things are only worth what people are willing to pay for them…

  • What if it assesses way higher than the price you bought if for? $170,000 more in my case. Is appealing really worth it in the long run? I heard it could potentially open a can of worms. More experienced commenters please.

    • ah

      What can of worms? If you appeal you have to show them that your assessment doesn’t accurately reflect the market price. What you paid for it (if very recent) is the best reflection of the market price and you can argue that.

      In theory they could reevaluate the assessment and increase it, but on what basis would they do that in your case?

      FWIW, I appealed a couple of years ago and got a good result. The only bad thing that came out of it was that the next year they went back and raised everyone else’s assessment as well as mine, but at least we were treated equally (I had been “singled out” for an increase the year I bought.

      • Ha, well know someone who didn’t appeal her assessment which was for 200K more than she paid for the house because she was also getting a senior citizen tax reduction (50% off property taxes). She bought the house when she was 30. The assessment was later corrected but last I checked, she’s still getting the senior citizen deduction. Grrr.

        • You can’t go buy what the website says all the time. It doesn’t always get updated. My house still says I’m not getting the homestead deduction, but I am.

        • ah

          That’s not opening a can of worms . . .

          That’s getting caught with your hand in the cookie jar.

  • 2 consecutive years of declining assessed value here. it was my understanding that tax assessors didn’t really know what they were doing. wasn’t there some stink in NOVA a year or two ago about tax assessors pegging homes at values way, way above market prices? residents complained and it made the news…not that i’m complaining about a declining tax bill, but if my assessor’s value is right i may be in some real dung.

  • Correct me if I’m wrong, but, unless you rent out your house, the assessed value doesn’t really mean anything. The City can raise your assessed value by 2,000% but can only raise your actual taxes by something like 10%.

    • saf

      It does matter, because they raise by the allowed value every year until you reach the assessed value.

      • Not really. I’ve paid the same amount in taxes for the past 7 years. In fact, 2 years ago my taxes fell…and this is in Columbia Heights, a theoretically hot market.

        My neighbor who rents out his house has to pay based on the full assessed value. Now that sucks.

        • saf

          I’m guessing you bought 7 years ago, at which point your assessment was pegged to what you paid. Since then, your assessment has gone up and down a bit, but not enough to hit the cap. Yes?

  • Properties in the District of Columbia are assessed at comparative market value for real property tax purposes.

    If you feel your newly proposed assessment is unfairly high, you should do more than just appeal the assessment if you are to be successful in having it lowered.

    It may take some time, but research the dates and sales prices of the 24 houses on your block as well as the houses on the block across the street from you. Eliminate sales older than two years ago, and try to use that information as the basis of a market approach to the assessed value of your home for tax purposes not for re-sale.

    Then research as best you can and argue the improvements or lack there of your property compared to the others sold within the last two years to best argue your case.

    I tried this once and was surprised at my findings. So were the three assembled panel members that heard my case about 15 years ago. They then raised my own assessment even higher.

    I’ve never appealed my assessment since. Many of us D.C. real property owners have seen our assessments come down these past three years however.

  • This basically happened to me too, but I think there are a couple more things going on than just the stuff people have pointed out. (I bought for 230K and got assessed for 330)

    First most of my neighbors that have owned for a long time have probably benefit from that provision that things can’t go up by more than 10% a year. The neighborhood is RAPIDLY improving (see my name) and so their purchase of the house for less than 100K 10 years ago is still limiting their tax bills.

    Secondly, I bought my house as a foreclosure– paying way less than what I believe/hope it is worth. It was an asthcetic dump, but if the bank had even done minimal work /repairs they’d have been able to get way more. So does my sales price reflect the current value? No. Houses like mine, renovated, are selling for 400K plus–so I guess that my assessment kind of splits the difference, and I’m ok with that.

    Not fun getting a huge property tax bill and realizing your neighbor paid say 90% less, but hey, I guess I’m the gentrifier, and didn’t ride out the bad times in my neighborhood. So, adios, hard-earned dollars.

    • No one in DC is getting a huge property tax bill. I have friends in Bethesda who pay $1000 per month in property taxes because they have a lot of land.

  • If you appeal you need a better argument than that — with figures, research, and proof that your home is not assessed correctly according to their records. For example, they thought my house had an alarm system, when really I just had a sticker saying I had an alarm system. Don’t show up to argue your appeal with just that argument. You will not win.

  • You should probably find out what the city uses to assess property before you start if you start. I know that upgrades internal and external, sales in the neighborhood, last sale our your house (as it applies to limit on assessment increases), etc. all go into the mix.

    My most recent assessment came out and it was a bit less than last years.

  • I thought the real estate tax assessment notices (or maybe the real estate tax bills) say at the bottom that the assessment will be changed to reflect the recent sales price (in the next cycle). That’s what happened to me; the tax year following my purchase, my tax assessment was changed to my purchase price (actually about $200 less than my purchase price). This year, the assessed value dropped well below what my purchase price.

    If you are being assessed at what you bought the property at, I don’t think you have any reason to complain (other than thinking you are entitled to a steal). You paid that much, so I don’t know how you could possibly argue that they didn’t get it right (MAYBE if you bought right before the huge collapse in prices, then you could argue that your price isn’t truly what it should be, but if you bought in the last year or two, that doesn’t apply to you). If anything, your neighbors should maybe be paying a little more than they are currently paying–but I don’t see how that concerns you, considering that you are being taxed correctly.

  • I agree with much of what has been said above, but this is a huge bone of contention that I have with DC. My not-so-private conspiracy theory: it’s the District’s Robin Hood property tax price gouge of new residents. These old houses sell for the first time in a generation, and when they do, the District re-assesses them for significantly more than their true market value to up the tax base, counting on the facts that (a) most new home buyers are in a higher income bracket, (b) most won’t contest their assessments, (c) your actual tax can only go up 10% a year, so they figure they can just bleed you dry over many years without you noticing it at first, and (d) they control the appeals process and can win a war of attrition against most of the people who do contest the process.

    The DC law on this says that your house is to be assessed at fair market value. Any economist will tell you: the best estimate of FMV is what you paid for your house in an arm’s-length, open market sale. So if you were assessed a penny more than purchase price, I would appeal it to the bitter end. The District will not be able to come up with more compelling evidence than that.

    My cautionary tale: I was a first-time buyer back in 2004. My first assessment was for nearly 300k MORE than what I paid for the place. Despite my house having an identical footprint to a dozen other homes on the street, for over a year, my assessed value was at least 200k higher than anybody else’s on the street, until those places started getting sold and getting re-assessed out the wazoo, too. I didn’t appeal then, and I regret it to no end. Basically, every re-assessment is pegged to the outrageously high one I first got, so even if my annual assessment comes down, it drops only from the outrageously high starting point, and my property tax bill goes up 10% like clockwork every year.

    I finally protested last year on principle: if they could jack me up when the market was good, they should drop it way down when the market was in the tank. I flooded them with market statistics about what things actually were selling for. Of course, that went nowhere. Don’t blow your first chance; it’s your best.

    • So I bought my house in 2001 for $96K but the ‘total value’ listed on my assessment is for $270,340. So are you saying that it should have been based on the purchase price of $96K? Or because it’s been almost 10 years that price is ok? BTW, the taxable assessment is $108,136, does that seem reasonable considering I only paid $96K?

      • In tax year 2002 (the year after you bought your house), the assessment should have been for $96K (unless it wasn’t an arm’s length, open market sale). Every year after 2002, your assessment should rise and fall with the market. Is this really that hard for people to understand? Financial literacy in this country is for shit. (BTW: captcha is “Well Bonehead”…couldn’t have said it better myself).

      • Kamantha — I wrote the post above, not the response. But yes, my argument would be that your first tax assessment should have been for what you paid for it. There simply is not better way to determine FMV in the year of sale. After that, though, the District has more wiggle room to justify a higher assessment. They’ll have slightly less, however, if the first assessment was based on actual sales price and that’s the starting point of reference.

        • Just to clarify, it doesn’t surprise me that 9 years after the fact your assessment has climbed that much. What U said, only in a nicer way.

    • ah

      The Robin Hood theory is proven by the 10% cap on annual tax increases, that has been applied retroactively way, way back. That means anyone who stays in their house a while probably has pays much less in taxes than the new buyer, even though their houses have the same assessed value.

      I’m all for lower taxes, but I think this law is a crock. The only people who have any sympathy from me are poor people. Not even old people, unless they’re poor. If need be, the city should allow certain people to accept a city-financed lien on their house to pay the tax difference, due and payable upon sale. So, if you’re old and can’t afford the taxes, get essentially a mortgage to finance them that you pay off when you sell.

      • It’s not really a theory. California does the same thing and it’s a large reason why the state’s schools are underfunded. People who bought their house before the .com boom can pay 10% of what their neighbor pays because the tax increase is capped.

        Some say it’s unfair, but it’s also unfair for people be kicked out of their houses because all of a sudden everyone thinks a neighborhood is “hot” now. Obviously the people who bought in when it was cheap have little effect on that. If I was careful and decided I could afford my house based on a fixed income and fixed costs but my tax bill went up 400%, that would be kind of unfair. It’s an academic discussion that has good points on both sides.

        The bigger problem is that the costs associated with a real estate boom can’t be reigned in. Every utility and city union feels like the boom money is permanent and should go into salary/cost increases that are only temporary. That’s why we have to have draconian layoffs after a boom.

      • The law requires that a home be assessed at fair market value. End of discussion. The issue here is the assessment from which the tax is calculated. Similar houses in similar locations should be assessed similarly. What the District does by assessing recently sold homes much higher than other homes on the block suggests they’re looking at buyer-based criteria, which, if true, has nothing to do with fair market value and, I would argue, is illegal.

  • I’ve appealed successfully several times, once getting almost $100,000 knocked off the assessed value. I went into the meeting with the assessor armed with photos of showing my house’s many defects, the rat-infested alley next door, and so on. By the time I was through, I was ashamed to live there. But it worked. And now I feel my assessment is fair.

  • My assessment went down for the first tiem ever in 15+ years. I don’t plan on appealing it.

  • I fought mine assessment 12 weeks after I purchased and it took three appeals and its a pain in the ass but totally worth it because you want to start your first assessment as LOW AS Possible becuase its capped how much it can go up every year after that. I locked my condo purchase price in at 179,000 two years before I actually closed (it was a renovation). So I paid 179,000 but three months later DC gov assessed it at 299,000. I kept arguing that its only worth what I paid. I also argued that living next to a giant section 8 property made it impossible to achieve that kind of appreciation and that seemed to work…so for once public housing worked in my favor. good luck.

  • I didn’t read all the posts given the unhelpful tone of the first few, so I apologize if what I have to say is redundant. This exact same discussion was handled on my neighborhood listserv and all the responses are constructive:

    I am challenging my own assessment this week. My thought is to compile 1) the assessment conducted by my lender, 2) a portfolio of assessed property values both on my block and in the immediate area, 3) pictures of those comparable houses, and 4) home sales for my block and area.

  • Oh, and I believe that the deadline to challenge is April 1st.

  • The District includes a couple of different figures on the assessment form, including ‘total value’ and ‘taxable assessment.’ Total value is what the city actually thinks your home is worth, while taxable assessment figures in the various discounts you may receive, such as the homestead deduction, the senior citizen’s deduction, and the 10% increase cap. My next door neighbor’s house is very similar to mine, both in terms of floor plan and condition. His total value is somewhat higher, but his taxable assessment is much lower, because he’s a senior citizen and because he has lived there since before values in this neighborhood increased dramatically over the last decade.

    Meanwhile, my total value went down about 5% last year, reflecting the general decrease in market, but my taxable assessment went up a lot. What happened? I bought the house last year and was still receiving the 10% increase cap that had applied to the previous owner. When they did the reassessment for the first time with me in the place, the increase cap vanished and now I only have the homestead deduction.

    The original poster needs to see whether his/her total value is dramatically different from the other houses on the block. (This information is freely available online.) If so, maybe there’s a problem. It is very likely, however, that the assessments will vary widely, reflecting the different situations of the owners on the block.

  • Get your facts straight, but you better have numbers. For example they took my public closing number and then added over $75k. I sent them my closing documents showing close to $45k the seller ate, ie closing costs, escrow returned to me for problems etc, and showed the depreciation in the immediate area of around 2%. I got my number down to my purchase price (actual) minus the depreciated amount for the neighborhood.

    I echo the “gov’t just grabbing my money” sentiment… and think the recording tax in the district is highway robbery.

  • Neighbors:

    Join Councilmember Bowser and representatives from the Office of Tax and Revenue’s Real Property Tax Administration for a brief presentation regarding your tax assessments. Representatives from the Department of Insurance, Securities, and Banking will also be present to discuss Reasonable Healthcare Insurance Premiums in the District of Columbia. This will be followed by the opportunity to ask individual questions of personnel from the aforementioned offices.

    When: Wednesday, March 17, 2010

    Time: 7:00 PM (Presentations & Q & A)
    7:45 PM (One-on-One with Officials)

    Where: Chevy Chase Community Center
    5601 Connecticut Avenue, N.W.

  • I have a healthy salary and a good job, but the difference between an appropriate assessment and a high assessment is enough for property tax to be a minor hobby of mine. I’m surprised that so many people aren’t interested in saving $thousands each year by helping the city government find the right value for his or her property.

    Finding that right value is very hard and the process is complex, and there are a lot of properties, but the city has done an excellent job of documenting their process and then subsequently auditing their own process. The last few years the results of these city audits have been very good both absolutely and relative to other cities. So, go read the official assessor’s manual on the DC tax website, learn that there are three ways of showing the value of your home, pick one (or two) that is favorable to you, and carefully show what you want the assessed value of your home to be. When you are done and the appeal is accepted (as mine always has been), take the few thousand you’ve saved and by a box of chocolates.

    The people with the nasty comments are basically the only ones on this list that make any sense.

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