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April 6, 2008

 

Kathleen Pender

 

 

Readers want reassessment details

 

 

Readers had some good questions about my Thursday column on how homeowners can get a temporary property tax reduction if their homes are now worth less than the assessed value.

 

In California, assessed value is generally the purchase price plus the cost of additions, plus up to 2 percent per year for inflation.

 

Homeowners can ask their county assessor to informally review their assessed value, at no charge. They can bolster their case if they provide recent sales prices for comparable homes, but they don't have to submit comps. Assessors generally try to finish informal reviews within a few months.

 

Homeowners also can file a formal appeal with their county's assessment appeals board, which usually takes longer and often requires a filing fee, typically $30. Boards have up to two years from the filing date to hear an appeal.

 

Here are answers to questions about this process:

 

Q: Ken L. writes, "Where can you get comps on the latest sales? Do you need to contact a Realtor or can you find it elsewhere?"

 

A: Real estate agents are excellent sources because they often can provide more details about a home than you can get from free Web sites. They also might be able to tell you whether the seller rebated part of the sales proceeds to the buyer to cover the buyer's closing costs. These credits tend to inflate sales prices above true market value.

 

Try calling friends who are real estate agents or agents who sell a lot of homes in your area. Some agents will help if they think you will be a future customer.

For do-it-yourselfers, many Web sites provide prices and other data for recently sold homes.

 

The Chronicle's Web site has just added a feature that lets you search for recently sold homes by ZIP code in seven (soon to be nine) Bay Area counties. You can find it at www.sfgate.com/webdb/homesales. For prices, click on Details, and for location, click on Map it and scroll down.

 

Web sites such as Zillow.com and Trulia.com provide home-sales data for many states.

 

To lower your property tax assessment (called a Proposition 8 reduction), it's best to find prices for homes in your neighborhood that have sold up to one year before Jan. 1 or 90 days after. Ideally, the comparable homes should be built around the same time as yours and have similar square footage, room count and lot size.

 

If you can't find good comps, you can submit listing prices on homes for sale. Although actual sales are always preferred, the California Assessor's Handbook says, "In addition to actual sales, the appraiser may consider listings, offers, options, and the opinions of owners, real estate agents, and other appraisers as to the selling prices that comparable properties might command."

 

Contra Costa County Assessor Gus Kramer says, "Sales are the purest statistic. Absent good sales, we will look at listings."

 

Q: Joe K. asks, "How is a new custom home assessed when there are no comps in the immediate area?"

 

A: Residences are typically assessed based on their market value, or what a buyer would pay. To determine market value, assessors typically look at recent sales prices for homes in the immediate area.

 

For unique or custom homes, the assessor might look for comps "farther away in distance or further back in time," Kramer says.

 

When prices are falling, going further back in time will result in higher sales prices, says Bradley Marsh, a state and local tax attorney with Winston & Strawn in San Francisco. In this case, the custom-home owner might look for comps farther in distance. When an assessor can't find enough comps to determine market value, he might assess a home based on its estimated cost of construction.

 

This is the approach used to assess Oracle Corp. CEO Larry Ellison's Japanese-style estate in Woodside at $166.3 million. (The construction cost was more than $200 million.) Ellison argued that assessment overstated the market value. An appeals board reduced the assessment by about $100 million.

 

Marsh has this advice for custom-home owners: "If you find similar situated houses are selling for X amount per square foot, argue that yours is worth X per square foot, regardless of the fact that you spent X plus Y designing it to your tastes."

 

He adds: "Homeowners that do the work to prepare themselves for these appeals are very successful, generally."

 

Q: Will K. asks, "What are the fiscal implications of large-scale revaluations on our schools, police and fire protection, public health, roads, etc., as so much public finance is supported by property taxes. Would it be a 1 percent reduction in revenue, 5 percent or even 10 percent?"

 

A: It's hard to predict what impact a large-scale reduction in residential property values will have on a county's total tax revenue. Although revenue will probably grow more slowly, they might not go down, for two reasons.

 

Under Proposition 13, as long as a commercial or residential property doesn't change ownership, the assessed value can't go up by more than 2 percent per year, plus the cost of any new construction. When there is a change of ownership, it is reassessed at the new market value, usually the purchase price for homes.

That's why people who have lived in the same home for many years usually pay far lower property taxes than people who recently purchased a home on the same block.

 

When a property changes hands for the first time in decades, it usually results in a steep increase in property taxes - sometimes 200 or 300 percent or more. One such increase can make up for a lot of 10 or 20 percent reductions in the same neighborhood.

 

Some assessors say they are being hurt more by a slowdown in sales transactions - because fewer homes are changing hands after many decades - than by reductions in property values.

 

On the upside, many Bay Area county assessors say that commercial and industrial property values are holding up or even rising, helping offset declines in housing.

 

"We are seeing downtown pick up. That's a huge part of the roll," says San Francisco Assessor-Recorder Phil Ting. (The roll is the value of all residential, commercial and industrial property in the county, plus business equipment.)

 

Santa Clara County plans to automatically reduce values on 41,231 homes that were purchased over the past three years, which will take about $3.1 billion off the roll. Nevertheless, the county expects that its total roll for the upcoming fiscal year will still be more than $300 billion, compared with $283 billion last year.

 

The last time Santa Clara County's tax roll actually went down was in 1978, and that was the result of Prop. 13 going into effect, says Santa Clara County Assessor Larry Stone.

 

In San Mateo County, "We are anticipating that the increase in the (2008-09) assessment roll will be lower than last year," says Deputy Assessor Terry Flinn. "Last year it went up 7.73 percent. We are looking at 5.75 to 6 percent this year."

 

Some harder-hit counties could see tax revenues decline.

 

Kramer can't predict what Contra Costa's roll will be. "It could be up 2 or 3 percent," he says. "It could be negative. It has the potential to be."

 

Kramer's office plans to automatically reduce tens of thousands of residential property assessments. "I also have my commercial-industrial guys coming in, telling me this piece of property that used to be on the tax roll for $23 million just sold for $170 million," he says.

 

Even in areas like Antioch, where residential values are plummeting, companies such as J.C. Penney are opening stores. Such a store could add $20 million to the property tax roll, he says.

 

Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at kpender@sfchronicle.com.

 

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This article appeared on page C - 1 of the San Francisco Chronicle