We often stop and reflect on our own lives. At holidays, on birthdays, or any random day, we reassess our character, our virtues, our moral, and our goals. But when is the last time we stopped and reassessed our home property values? As an important practice to learn about for personal finance, it is also an important factor in today’s brick-and-mortar retail sector, as well as in local politics. Property value reassessment is often an overlooked part of our financial lives, though its impact may be greater than you think. Every county in the United States has what is called the Assessor’s Office. Every year this office issues updated property values for each parcel of commercial and residential real estate in its jurisdiction. If you own your home or other real estate property, your annual property tax is based off of this assessed value. For residential homes, assessed values are derived from market values and the desirability to live in that location which is determined by school zones, crime, proximity to parks, and other factors.
As a matter of personal finance, you should be checking your assessed property value every year to make sure it is fairly and accurately reporting your home’s true, intrinsic value. There are several things you should check for:
- The assessed value as it relates to its market value on websites such as Zillow
- The rate of increase of assessed value year-to-year for as long as you have owned the property, or even before you took ownership
- The assessed value as it relates to the average home value in your neighborhood
You may find that your assessed home value has been set too high and you are paying an undue amount of property taxes. There are several ways to contest an assessed property value, and though it differs from county to county, it is usually pretty simple. Often, this process involves sending in a market value or neighbor’s assessed property values documentation. This service is usually provided by CPAs upon request, so take it upon yourself to do the research! You may be saving a lot more than you would think.
The assessor’s office often becomes a centerpiece in local political issues as well. In my own experience, my high school’s district was issuing a new bond in order to fund building new and developing old schools. For those who might be unfamiliar, one of the main sources of revenue to a local school district is property tax revenue collected by the corresponding municipal government. Interest payments would have to be made on the bond, which translates into additional budgetary needs of the school district. Proponents of the bond issue had claimed that people’s tax rates wouldn’t go up to fund the interest payments. Greater resources for education at no additional cost…sounds like a great deal! Here is a lesson: money is never that easy. The proponents didn’t lie – tax rates did not actually go up. Instead, everyone’s assessed property values did. This action was not necessarily diabolical. In fact, it made perfect sense. If the municipality of Keller, TX could offer a better public education system for its jurisdiction, that would justify greater demand for homes within the school zone. Greater demand for local homes means greater assessed values on property. As we are all citizens of a municipal government, we should be very aware of the role the tax assessor’s office plays in local politics.
The tax assessor’s office is also playing an interesting role in investment, specifically in the brick-and-mortar retail sector. As you’ve likely heard by now, the brick-and-mortar retail industry has taken a huge hit in past years. The convenience of online shopping has driven retail giants like Macy’s and JC Penny to close down hundreds of unprofitable stores. Following their closures, malls which can no longer afford to remain operational. Investment companies that own and rent out retail space have become the target of restructuring investors, who buy the bankrupt investment trusts. These investors often look to the tax assessor’s office as their first point of business in order to regain profitability. In commercial real estate, the tax assessor can assess the value of property (a store, mall, pier, etc.) based on the revenue it brings in. Malls that had many customers were taxed accordingly, but once their customer base dissipated to a fraction of its original size, taxes still remained at their peak. Empty commercial space and high taxes were key facts in the failure of these investment trusts. If restructurers are able to negotiate for lower assessed values, there could be a future in brick-and-mortar business. Perhaps it will never be as lucrative as it once was, but at lease it will be profitable.
Understanding the importance of tax assessors, we might be able to come to a conclusion about skyrocketing real estate costs in metropolises such as San Francisco and New York City. With the rise of the internet, telecommuting has become increasingly viable. Would this mean that people might have less of a desire to live near a city center? A sharp decline in demand could cause real estate prices in these cities to plummet. Will the tax assessors of the counties that encompass these cities react quickly enough to the change in real estate values, or like brick-and-mortar retail, will they only budge after bankruptcy and subsequent restructuring? This is a whole lot of conjecture - none of this could happen anytime soon, but the danger is apparent. The moral of the theory is simple: Don’t underestimate the importance of the county tax assessor’s office.
Fung, Esther. “Lower Property Taxes Are Silver Lining for Landlords in Weak Retail Market.” Wall Street Journal, August 29, 2017, sec. Markets. https://www.wsj.com/articles/lower-property-taxes-are-silver-lining-for-landlords-in-weak-retail-market-1504004403.
“North Texas Increasing Tax Values Impact School Bond Dollars | Fort Worth Star-Telegram.” Accessed September 5, 2017. http://www.star-telegram.com/news/local/community/northeast-tarrant/article139617733.html.
“Tax Assessor-Collector.” Accessed September 5, 2017. http://access.tarrantcounty.com/en/tax.html.