Tax Assessments: Voodoo or Fact?

I get asked quite often about how taxes for a particular home are calculated. So much so that recently I arranged a meeting with one of the County's tax assessors to ask how it's done. This brief meeting left me with more questions than answers...

So the other day a made a copy of my home's tax assessment and set about trying to understand all of the calucaltions. (This information is open to the public at the tax assessor's office in the basement of the "old" courthouse in Hollidaysburg. In fact, tax assessments can be appealed and, in some cases, lowered to reduce your taxes if they are unfairly high. Tax appeal time is in September every year, so make sure you fill out the proper appeal form in August to schedule your meeting.) Anyway, back to the purpose of this blog...

Your home's assessed value is based on its square footage and its replacement value, anything considered an "upgrade" will raise your taxes. In fact, I think the main reason you have to apply for a building permit is so that the tax assessor knows when you've improved your house so he can raise your taxes. Upgrades would be brick or stone exterior, finished basement, cedar shake shingles, hwd or tile flooring, finished attic, radiant floor heating, enclosed and finished porch, and so on. If you think your taxes are too high because someone you know has lower taxes, compare the two homes closely, inside and out.

Age and condition are also major factors in determining taxes. Identical houses built many years apart will not have the same assessment value because the tax assessor devalues houses the older they get. This is why new construction always has higher taxes.

Location, to a small extent, affects taxes too. Each of the 22 municipalities in Blair County have different millages. I don't consider this very important because I've never heard of anyone wanting to live in "X" township because the taxes are lower, and because their isn't that big of a difference from the lowest to the highest taxing body anyway.

So I hope I answered some questions. You can always call me...

John

Take Advantage of the Market--Upgrade Now!

“We’d love to get a bigger place, but I think we’ll wait until the market improves.”

I’ve heard that statement several times lately, and it occurred to me that maybe now is when you should upgrade because the market is soft. Let me explain (put your math hats on, please).

For many years in this market, homes sold for 95% of their list price, on average. In other words, homeowners were giving 5% discounts. A lot of these homeowners, then, became home buyers, and, on average, would pay about 95% of the list price for their new home.

Mathematically it looked like this:

Old House
Listed For $100,000
Sold For $90,000 (%5 discount)

New House
Listed For $200,000
Bought For $190,000 (5% discount)

Difference: $190,000 - $90,000 = $95,000

The Advantage of a Soft Market

Now let’s take a look at what’s going on right now. I’ll agree that it’s more of a buyer’s market—homeowners, in many cases, are giving discounts of 10% or more. As you can see, that’s not all bad for those of you who are upgrading or wanting to build a new home:

Old House
Listed For $100,000
Sold For $90,000 (10% discount)

New House
Listed For $200,000
Bought For $180,000 (10% discount)

Difference: $180,000 - $90,000 = $90,000

These folks had to give a 10% discount to sell their old house, but got the same discount when buying their new one. And since they were upgrading, the discount on the new house gave them a greater dollar amount, thus they “saved” $5,000. (By the way, this opportunity applies to those of you who want to build a house too. The new construction market is even softer than the existing home market.)

Not only can you take advantage of this market to save some money during your upgrade, you have a better shot at buying your new home using a sale and settlement contingency. This type of contingency allows you to get out of the contract on the new home (with your deposit) if you cannot find a buyer for your old home. In hot markets, most homeowners will turn down an offer with a sale and settlement contingency because they know that another offer will be coming soon without one. In slower markets like this one, many homeowners are glad to just get an offer and will accept the contingencies.

We all know what happens when the market is hot: you find a great house, but so do three other people. Then you feel obligated to offer a little bit more than you would have if you were the only buyer. Or, you keep finding the perfect house, a day after it went under contract. So, if you can find the house you want at a significant value, don’t hesitate to make the move.