Assessments

More on City Assessments

I requested from the City a breakdown of all residential assessments for 2013 and the adjustments by neighborhood. They were kind enough to respond very quickly. I have reformatted what they sent to me, and thought I would pass it along here.

Below, you will find the 22 Neighborhoods that saw decreases in 2013 assessments from last year. This list does not mean that EVERY property in the neighborhood was treated the same. It means that barring any new information provided to the assessor’s office, this is the adjustment due to “General Reassessment”. The other 25 neighborhoods in the City did not have any adjustments this year due to General Reassessment.

DecliningAssessments

In looking for a pattern, there is nothing that stands out. Three of the ten most expensive neighborhoods saw declines, while eight of the bottom ten saw declines. Of those top three, two were university area (although oposite sides) and one was near downtown. Of those that declined, some were detached homes and some were condos. Some were new construction (Carter’s View / Brookwood / Burnet Commons) and some were among the oldest homes in town (Fifeville / Fry’s Spring / Ix – Belmont). Every elementary school district seems to have some neighborhoods that declined and some that stayed flat.

The flip side to all of these numbers is that inventory is currently at a 7 year low in the City, and competing offers are common. The fact that the Assessor’s Office is showing a decline from 2012 is not mirrored by the current exuberance for City properties.

 

Value of Tax Value

The City of Charlottesville released their 2013 tax assessments this week. Mailings have been sent to home owners, and the web site has been updated to reflect the changes.

Assessments cause all kinds of a ruckus. There is an erroneous perception that prices should instantly adjust to match these new numbers. Nothing could be further from the truth. Reality is, this is the City’s best effort to meet state requirements to estimate the values of the parcels in the city. No one in the assessors office would argue they are perfect. I won’t go so far as to say they are even close in many cases.

There are, however, certain times when assessments should be darn easy. Like the day a home sells. If a home sells for $745,000 after being offered on the open market, and the transaction is indeed an arms length transaction, it makes total sense that the City would be able to assess that house without really thinking about it. The value at which a seller is willing to sell and a buyer is willing to buy is $745,000. That is the definition of market value. And that’s why it’s truly bizarre to see the assessment today on this house at $381,000. (Assessing this home at 51.2% of its market value.)

From the City assessors web site:

Real Estate Assessments are required by the Codes of Virginia and the City of Charlottesville to be at 100% of fair market value.  Assessments are made each year by the City Assessor’s Office and are effective January 1.

and

As required, the City’s assessment is an estimate of fair market value as of January 1 each year, based on property sales for the previous calendar year.

The City breaks down the city into neighborhoods and then samples that neighborhood to determine what is happening price wise over the course of the year. Then, barring changes to a home, they apply a % change to all the houses in that neighborhood. There are certainly some places where there is more specific work being done, but in general, this is the practice. I pulled up a sampling of 10 homes in the neighborhood that is bounded by Rugby Road, Emmett Street, Westview Road, and Wayside Place. The tax assessments I pulled changed from -4.68% to -4.7%. You can’t tell me that is an accident. So, the question is, how accurate is this practice. I would say we can bicker about whether -4.7% is the correct amount, but in general, I agree with the practice. If my neighbor’s home goes up 5% or down 3%, it is fairly accurate to say mine did too — UNLESS one of us has done improvements or allowed our house to waste away, in which case, they certainly change at different rates.

So, I focused on this one neighborhood and pulled every house that sold in 2012 to see if the new 2013 assessments were accurate for these homes. Nine homes total ranging in sales price from $367,000 to $1,250,000. How’d they do? Mixed Bag.

  • 938 Rosser Lane – Sold for $367,500 – Assessed for $443,600 – 121% of Sale Price
  • 901 Rosser Lane – Sold for $450,000 – Assessed for $449,200 – Spot On.
  • 1865 Field Road – Sold for $469,000 – Assessed for $511,900 – 109% of Sale Price
  • 1825 Edgewood Lane – Sold for $530,000 – Assessed for $734,100 – 139% of Sale Price — (NOTE: On the market for nearly a year)
  • 1859 Wayside Place – Sold for $706,000 – Assessed for $590,000 – 84% of Sale Price
  • 1863 Wayside Place – Sold for $745,000 – Assessed for $381,600 – 51% of Sale Price
  • 920 Rosser Lane – Sold for $753,000 – Assessed for $735,000 – 98% of Sale Price
  • 1872 Edgewood Lane – Sold for 890,000 – Assessed for $778,800 – 88% of Sale Price
  • 1820 Edgewood Lane – Sold for $1,250,000 – Assessed for $993,000 – 79% of Sale Price

Don’t get me wrong, I totally respect the fact that assessing homes that the City has likely never been in is extremely hard. And I respect the fact that the city has a good process. But no one can argue that a group of nine homes that all sold in the past year, arguably the easiest homes to assess, range in values compared to their sale price from 51% to 139% all in the same neighborhood is anything close to useful, valuable, or accurate.

My point here is not to say that all assessments are bad, or that we should be challenging every one. What I want people to realize is that basing listing and offering prices on City (or County) assessments is dangerous. While it can be a guide, and certainly should be considered, it has to be a single tool of many in pricing a home. We look at comps all day long. And the price you paid four years ago for your home will affect its sale price far more than the new City assessments. Prices in the Venable neighborhood did not go down 4.7% this week with the new assessments. The only thing that changed is that the taxes these home owners will pay went down by 4.7%.

 

 

Raising Perceived Value

I had a professor in B-School who at the end of a class session would, as students began coming to the conclusion that he wanted all along, remark, “I love it when a good plan comes together.” Well, I feel that way today. On March 17, I posted a blog on tax assessments and relative value / perceived value. I argued that sellers should fight with the County / City to raise their assessed value when they go to sell their house as this will provide a higher baseline. County of Albemarle - GIS-Web - Property Information.jpg

Well, I have a reader who did just this. Perhaps they are not a reader, but I found a listing this morning where this has happened. Look to the right at this copy from their assessments, and I’ll go over what has happened.

So, here is a very nice home in Western Albemarle that was assessed in 2007 for $924,500. In 2008, that assessment dropped to $899,800. Along with the overall market decline in 2008, the 2009 resulting assessment dropped another $39,000 to $860,000.

Enter the owner who wishes to sell his home. I contacted the assessor to ask what “Appraiser’s Review” meant. According to the assessor, the notes in the computer stated that the “owner contacted the assessors office and stated that they believe that the property assessment did not reflect a high enough value.”

Wow. They keep records of why appraiser’s reviews take place. Even better for my purposes. The new assessment reverses two years of declining real estate prices. The new assessment was valid as of Feb 13, 2009 and was entered at $927,600.

On March 4, 2009, the house goes on the market for $1.125 mm. Now, that is still priced at a 21% premium to the tax assessment. Pretty aggressive. But if you go back the official County of Albemarle assessment, we are now 30.7% premium to tax assessment.

Personal thought: neither will fly. BUT… 20% over tax is certainly better than a 30% premium. And if other agents don’t really look through the history of the assessment, they may not even notice the change.

A note to the readers. In the City of Charlottesville, there are no history files available on assessment values for real estate. Only the current assessment is on line. You can contact the assessor’s office and they will give you the historical numbers, but their on-line information does not have the ability to display the history.

If any readers see additional homes like this, let me know, and I’m happy to look at the process.

What Makes Something Relevant

Across the blogosphere I continue to read about tax assessments and predictions of value.

Here

Here

oh, and one of my personal favorites… Here

HomeValue.gif

The question I have is, what makes something relevant? Are tax assessments a good gauge of future selling price? Are they an accurate reflection of current value? What makes them so, … or not?

When I moved to Charlottesville 13 years ago, taxes were not on-line. I did not go to the City Hall to pull the file on the house I bought to check on taxes. For two reasons. 1) I didn’t realize how easy it would be and 2) I have no clue if there was any correlation at that time between tax assessments and selling prices.

Somewhere along the lines, access to this information has become common place and easy. But does that mean that it is relevant? If 5% of buyers pay attention to tax assessments when making an offer, then it is unlikely that they matter. But if 90% of buyers make their offers based on tax assessments, then the values are highly relevant, but that doesn’t answer if they should be.

Most homes in my neighborhood went up 5% in our assessments this year. All the neighbors with whom I spoke were outraged, and several asked for data to support their cause in fighting the values. To one neighbor, I suggested he not fight it at all. In fact, I argued that he should fight for a higher value. Why? Because he is likely to sell his home in the next three years. If people are going to base their offering price on the assessed value, the last thing he wants to do is fight for a lower value.

If a home owner can get the tax assessment down by $25,000 then they save roughly $275 a year, but may lose $25,000 when they go to sell the house.

I watched last year at a city house that was on the market for substantially more than the assessed value. It did not sell through the Fall, and when the assessments came out in Feb, the neighborhood in which the house was situated had assessments remain completely flat. But, the assessor, I guess, looked at this listing and figured the seller thinks it’s worth more, I can get some more tax money from the owner, and thus raised the assessment.

Whether that new assessment had any bearing in the eventual sale of the property, I don’t know… but I do know that nothing else changed in the neighborhood to increase the value. Therefore, the new “higher valuation” really was a joke. So, why should the taxes be relied upon?

So, do people pay attention because they are accurate reflections of value? Or are they accurate reflections of value only because people do pay attention?

MLS Fields

In real estate, our clients expect that the information we provide will be accurate. They want it in a timely manner, and they want all the information in a one-stop shop. Sometimes, however, the information that we have in our MLS is not really correct.

A quick run down on some items that may or may not be right, and what we are doing / trying to do to fix it.

Days on Market – A number of years ago, it was a common practice among some agents to withdraw and re-list properties on a regular basis (every 25 days or so). A look back to 2006 real estate will bring up several homes that have as many as 6 MLS Numbers. Most good agents knew to check the history of the property and tell their buyer clients, but the practice continued. The number one reason to do it is that the property would pop up on all agents’ hot sheets and would go out to prospects on automatic e-mails nightly. Well, we haven’t stopped it entirely, but we have done a good bit to slow it down.

Enter CDOM or Continuous Days on Market. This little ticker can’t be reset. So, even when a property is withdrawn and relisted, or even listed by a new broker at a new firm the CDOM keeps on counting. There is no hiding how long a home has been listed. I have seen agents who attempt to add an apartment number or other identifier to get rid of the CDOM, but almost always other Realtors report the violation, and it is fixed.

Tax Assessments – So, here’s a good one. I was able to buy the tax records for the city and was able to match most of the current listings with records fairly easily. Not 100%, but it was possible. A little more time and effort and I could have it. But, at CAAR, we don’t have the resources to match the data within a reasonable amount of time. So, the city tax records in CAAR are several years old. The County tax records are from 2006. There is no real reason why we can’t get the taxes to match up. We need to train our agents better to use parcel ID for their properties. This would provide a fool proof way of matching the records.

Square footage – This is the one that drives me crazy. A client calls and says they would like a 2500 square foot house. You find a home in the right school district in the right price range but with no photos. When you arrive, you find a 1500 square foot ranch with a 1,000 square foot basement. This is not a 2,500 s.f. home, even though it might be technically. We rely so much on the data from the MLS, but we have no way of separating out above grade and below grade square footage. This is currently being examined by the CAAR Tech Committee, although I don’t know yet what direction we will head. I hope that we will see three fields. Above Grade Finished Square Footage, Below Grade Finished Square Footage and Unfinished Square Footage.

GE Supra eKey – This isn’t bad data, it’s no data. For every house in the MLS, there should be a lock box. (There are exceptions, but not many.) Every time an agent opens up one of these boxes, the information is stored at GE, and at our CAAR offices. I want to see a weekly number of how many boxes are opened every week. The actual number is irrelevant, but the trend would be amazing to watch. If Contingent and Pending sales are an indication of upcoming sales, then Supra eKey box openings are a harbinger of Offers, and thus contracts, and thus sales. This is the greatest indicator that consumers should want to see, and should be screaming for.

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