The Best Home Improvement ...
A Reduced Property Tax Assessment
A Modest $100 Per Month Reduction In Property Taxes
Will Improve Your Home’s Marketability By $26,000 (Or More)
How Do Property Taxes Affect Your Home’s Value?
Each $100 per month in property taxes ($1,200 per year) would be $100 per month that a prospective buyer cannot apply towards the mortgage payment. At a mortgage interest rate of 4% for 30 years, that modest $100 per month ($1,200 per year) translates to approximately $21,000 in “lost borrowing power” and, if the buyer is making a 20% down payment, that $100 per month towards property taxes becomes approximately $26,000 in “lost buying power”.
Consequently, for every $100 per month you pay in property taxes, your home’s “affordability” is reduced by approximately $26,000. If you are trying to sell your home and a competing home at the same price has property taxes $1,200 less per year than yours, then the competing home is $26,000 more affordable than yours.
Therefore, being over-assessed may end up costing you quite a bit when the time comes to sell your home.
A Brief Overview Of Property Taxation
The taxation of citizens' wealth and property has existed for thousands of years. It was first imposed in this country approximately 350 years ago. Those first property taxes were levied upon the Colony of Massachusetts to fund local government.
Amazingly, the taxation of property today follows virtually the same theories and procedures as 350 years ago. The higher the property value, the greater the tax.
And we have property taxes today for the same reasons we had them then. Property taxes are the primary source of funding for local governments and municipal services in this country. Property taxes are required to finance education, police, fire, transportation, recreation, local facilities and general funds.
Property taxes today (while having their authority in state law) are administered, collected and spent at the local level.
Property taxes have their basis in the theory of "ad valorem" (according to value). Each property is supposed to be taxed according to its value. Therefore, it is important that your tax assessment (the value that the municipality has recorded for your home) accurately reflects the current market value for your home.
On the surface this seems to be a fair and equitable system of taxation - the higher the value - the higher the tax and it shouldn't matter what percentage of the actual value is used as long as the percentage is applied accurately, uniformly and equitably. In theory, the method is fair.
Unfortunately however, anytime a calculation is applied on a "mass basis" without being periodically reexamined or recalibrated, errors are bound to occur and inaccuracies will develop.
The reality is that the properties themselves, and the market to which their values are linked, are constantly changing. It is this never ending change that causes inequities to be created in the valuation of the properties.
It is the responsibility of individual property owners to monitor conditions that effect the value of their property and to be vigilant in making the "taxation authorities" aware of these changes, otherwise, inequities are bound to occur.
The Nuts & Bolts Of Property Tax Assessments
In the State of New York there are three property tax collecting entities - Cities, Villages & Towns. In general, if you live in a city, you pay all of your property taxes to the City. If you do NOT live in a city but you live within an incorporated village, you will most likely be paying taxes to the Village for municipal services and to the Town for the schools. If you do NOT live in a city or an incorporated village, you will be paying all of your taxes to the Town.
Property taxes are calculated by multiplying your property’s assessment (its value) times the tax rate established by each of the various municipal entities.
To determine if you are being taxed correctly, you need to determine if your home’s tax assessment is an accurate representation of its market value.
In our area, tax assessments are based on home values from the 1950s and a multiplier (the Residential Assessment Ratio – the RAR) needs to be applied to your home’s value to determine its tax assessment (which is expressed as property values from the 1950s). Or if you know your tax assessment, you can divide your tax assessment by the RAR to determine what the municipality considers the market value for your home.
NOTE: For properties located in an incorporated village, there may be two different assessments (Village & Town) with two different RARs to apply.
If you divide your assessment by the RAR and the result is much higher than what you feel your home is worth, then your home may be over-assessed and you may have justification to file a tax assessment appeal at the appropriate tax assessor’s office.
Each year there is a deadline by which such appeals must be filed. As was mentioned above, if you live in an incorporated village, then there may be two different assessments and two different assessors with whom you will need to file your appeal. To make matters even more complicated, Villages & Towns operate on different fiscal years and the deadline for Village assessment appeals is the 3rd Tuesday in February and the deadline for Town assessment appeals is the 3rd Tuesday in June.
© Copyright 2012 Bill Boeckelman Publications