Tuesday, February 23, 2010

Real Estate Assessments

New Bill Would Level the Playing Field for Homeowners

By Victoria Cobb

One of the biggest aggravations – and financial hardships – local governments place on taxpaying families is the assessments on their property. Not only are local property tax rates often much too high, the assessments are as well, resulting in a double infliction of financial pain.

Of course, by law, localities must allow homeowners an appeals process if a homeowner thinks the assessment is too high. But, as usual in Virginia, we have laws to remedy a problem that are nothing more than window dressing. In fact, Virginia’s assessment appeals process is counterproductive to a fair appeal. It’s almost like an IRS appeal where you are guilty until proven innocent. In the case of an assessment appeal, you must prove the assessor wrong – he or she has no burden to prove your property is valued at fair market value. It is such a stacked system that most aggrieved families don’t even attempt to appeal and end up paying more than they should of their hard-earned income in local property taxes. [Been there, done that]

Now, we have a chance to reform this overly slanted playing field in favor of the government to a level playing field through legislation patroned by Delegate Sal Iaquinto (R-84, Virginia Beach), HB 570 [click to read]. It passed the House and will be voted on in the Senate Finance Committee Wednesday!

According to the bill’s fiscal impact statement: This bill “would shift the burden of proof from the taxpayer to the assessor when the taxpayer appeals the assessment of real property to a Board of Equalization or to a circuit court, and would remove the presumption that the assessor’s valuation of real property is correct. The assessor would have the burden of proving that the property in question is valued at its fair market value or that the assessment is uniform in its application, or that the assessment is otherwise valid or legal.” Currently, in all such cases, the taxpayer has the burden of proving that the property in question is valued at more than its fair market value – and is “required to produce substantial evidence that the valuation determined by the assessor is erroneous and was not arrived at in accordance with generally accepted appraisal practice in order to receive relief.”

Please contact members of the committee and ask them to report this bill to the floor so that taxpayers, homeowners and families finally can receive a bit of tax fairness.

ACTION: Contact your Senator and ask them to pass HB 570!

Update: Augusta County Weighs In [click to read]. ht/SWAC Girl

5 comments:

Whit said...

The problem with this bill becoming law is that it would flood the (citizen-filled) Board of Equalization with every merit-less appeal and completely bog down the system. It would result in increased costs to the taxpayer.

Judges in Virginia have consistently recognized this problem in an imperfect system and give the benefit of the doubt to the assessor's work, not because the work is infallible but because of the problems inherent in mass assessments. The vast majority of appeals consist of a property owner claiming the assessment is too high, with nothing to support the claim. The benefit of the doubt for the assessment exists in part to move those appeals quickly through.

When an owner presents evidence of a mistake or additional info not available at time of appeal, that is considered. Its obvious when an owner has done his homework. Simply berating the assessor and board with political complaints or general discontent with the valuation is not grounds for a successful appeal.

Having worked in assessments, I would like to see the Legislature consider assessing based on the last fair-value sale (if the sale is not an arm length sale- the locality would hire a fee-appraiser to give a summary appraisal). The locality could be allowed to tax properties with a sliding scale based on length of ownership. The idea being, the longer you own a property, the less govt services you demand over time.

Of course the best system would be to go to a straight sales tax. I would rather tax consumption instead of wealth.

This current legislation is not the answer and would complicate an already outdated valuation system.

Bob K. said...

One of the things Aaron Sime campaigned for in his bid for the State Senate was assessments based on the last fair-value sale. That would certainly be an improvement over the present system.

The inflated values are already hurting Augusta County in the distribution of State revenues to localities. Obviously we need to do better at tying these valuations to some 'real' benchmark. That having been said, I think part of the answer is a better appeals process. The last assessment in Augusta resulted in a record number of appeals even though the system was stacked in the County's favor. Properly designed, an appeals process would serve as a check against radical changes in valuation. Most people wouldn't bother to appeal what looked like a reasonable change but major changes would invite a surge in appeals cases.

Checks and balances being a healthy part of our system, I still favor improvement to the appeals process.

Whit said...

It wouldn't work Bob.

Unfortunately, most people can't sit through a lot of assessment appeals. If they could, they would know the vast majority of appeals consist of the owner making a general claim, sans evidence that their valuation is too high. Their frustration in a down economy is understandable. Assessors working appeals don't like saying no...they have to live,work and pay taxes in the community as well. It brightened my day when I ran into an owner who had done his work and could make his case for a decrease in value. Funny how the media never interviews those folks.

How would putting the BoP on the assessor doing the appeal work? Who would sit there to determine that the assessor has made the case (for the 2nd time mind you, since the BoA and the Dept of Tax. has accepted the work)? If a property owner came in, submitted no evidence of a mistake or new information and the assessor didn't meet this new burden of proof... would the property owner get to set his own value? See the problem? Its inequitable to the rest of the locality's tax-base. How would that be fair to the property owner beside him who doesn't come in to appeal and now has to take on additional tax burden?

The current system at least requires the property owner to shoulder some responsibility in researching his claim and he has 3+ levels of appeal to make his case. Its not perfect but it works.

PS- you would be surprised at the # of people who appeal and wish to see their assessed value increase (for refi, insurance, etc)
... that NEVER makes the papers or the blogs

Bob K. said...

All of this serves to make a strong case for basing valuation to the last fair-value sale.

A friend of mine and I live in similar houses in Augusta County. Our assessment value went up similarly.

In each of our neighborhoods there was a house of similar value for sale at the time of the assessment. The one in his neighborhood sold [at much less than the 'valuation' placed by the assessor]. The one in my neighborhood remains unsold. The owner is now renting it to a family.

As you may guess, my friend handily won his case and mine was denied. An actual sale in my neighborhood would have likely resulted in my case being successful as our appeals were in every way similar save for the comparible in our own neighborhood.

Placing the burden of proof on the County would have resulted, I feel, in a more equitable resolution and would simply require the County to make better use of actual sales figures. The end result would be a more realistic picture of actual values.

If the County simply projected actual sales into a model to develop their rational I do not see how it would place undue stress on the system. In a normal cycle the assessment appeals that need to be heard would always be the ones involving substantial change in valuation.

In short, checks and balances require some work, but the process can certainly be designed so as to be workable.

Bob K. said...

§ 58.1-3331. Public disclosure of certain assessment records.

A. All property appraisal cards or sheets within the custody of a county, city or town assessing officer, except those cards or sheets containing information made confidential by § 58.1-3, shall be open for inspection, after the notice of reassessment is mailed as provided in § 58.1-3330, the normal office hours of such official by any taxpayer, or his duly authorized representative, desiring to review such cards or sheets.

B. Any taxpayer, or his duly authorized representative, whose real property has been assessed for taxation shall, upon request, be allowed to examine the working papers used by any such assessing official in arriving at the appraised and assessed value of such person's land and any improvements thereon.

C. The assessing officer of the governing body may fix and promulgate a limited period within normal office hours when such records shall be available for inspection and copying, but such period of time may not be less than four hours per day on Monday through Friday, except on such days when the office is otherwise closed.
(Code 1950, § 58-792.02; 1975, c. 615; 1979, c. 577; 1980, c. 124; 1983, c. 161; 1984, c. 675.)