Property Reassessment: Will Lower Values Impact The Market?
Real estate experts talk about how a pronounced decline may or may not affect real-time pricing of Montclair properties
Roberta Baldwin, a co-owner of Keller Williams NJ Metro Group in downtown Montclair, is just one real estate agent with a lot of questions about the recent township-wide reassessment in Montclair.
"I don't think the average local citizen here has fully thought out what it means to have an appraisal slapped on their house in the middle of a recession—and how can they? It's still in the mystery mode," she said Tuesday.
On the one hand, she asserted, everyone knows that home values have gone down in Montclair, as they have most everywhere else.
"But when a 25 percent—in one case—'deduction' is made in a reval on a house that's say, bordering a park, or in an exclusive mountainside location, so that it appears to be 'worth' the same as a house on a busy street, say, where is the balance and reality?" she asked. "And we don't know yet what the new tax rate will be so figuring out if your house is going to have a tax boost despite being devalued isn't possible."
Baldwin said that Montclair homeowners could use West Orange as a guide since that town recently underwent a revaluation that resulted in similarly pronounced declines in property values.
Indeed, West Orange hired Appraisal Systems, Inc. in March 2010 under a $1,143,000 contract to conduct the township's first revaluation in more than 20 years.
"I listed a house there that saw its reval come in right after an offer was accepted," Baldwin said. "The reval number was about $75,000 under the offer and the buyers didn't flinch.
"They knew they were already getting a bargain, as they were paying $300,000 less than the last sales price," she said. "So perhaps this will still be all about homeowners making their homes tip-top in all respects in order to command whatever the real-time market will bear, in spite of the changes in tax values."
Baldwin said that hopefully educated buyers will "get" that a reassessment is but one element in determining and also understanding the true value of a home in today's uneven and complicated housing market.
Even so, Baldwin said she's started to get calls from clients who can't believe how low their new assessment is.
"So far, the range of decline from the 2006-2007 town-wide revaluation is approximately 12 percent to 25 percent," she said. "Some I've spoken to wonder how an assessment can be made without going into the house."
Beverly Meaux of Towne Realty Group pointed out that the assessed value is the value the company places on a property at a specific point and time based on other properties in the neighborhood, specs, and estimated square footage.
"This is why it’s not valid for a homeowner to try and translate their out of date assessed value to today’s market value—what a willing and able buyer is will pay for the home today," she said. "Thus, the new assessed values could be a good barometer but nothing more and could just as well be outdated in 90 days depending on market fluctuations. Just look (here) at the difference in values between the November sales and the old assessed value.
"There’s a difference between assessed value, appraised value, and market value," Meaux said.
Meaux said that the purpose of the assessment is to rebalance the payment of taxes across households, adding that the ultimate tax rate has nothing to do with the assessed value.
Montclair hired Realty Appraisal Co. of West New York in July 2011 to conduct the township-wide reassessment in order to adjust Montclair’s property assessments to reflect current market conditions and reduce the disparities created by five years of property tax appeals.
The new assessments are based on 2011 property sales and listings and largely rely on the building and land data collected in the 2006 township-wide revaluation. In addition, according to township officials, Realty Appraisal Co. personnel visited homes with outstanding building permits and township representatives performed exterior inspections on many other properties.
Whereas the 2006 township-wide evaluation of all Montclair properties was mandated by the Essex County Board of Taxation and the State of New Jersey, Montclair voluntarily undertook the 2011 property reassessment. Over 1,100 taxpayers filed appeals in 2011, resulting in millions of dollars of refunds.
In regards to the reassessment, Mayor Jerry Fried recently explained that the overall "pie" has shrunk by 19 percent.
"So if the 2012 combined budget for schools (about 58 percent) county (about 17 percent), and municipal government (about 25 percent) stays flat relative to 2011—and one's new assessed value is the same as it was in 2007 (rare) and one hasn't appealed one's assessment since the 2007 revaluation—then, yes, one's taxes would go up 19 percent in 2012," he said.
In the end, Baldwin questioned how such a pronounced decline in property assessments would impact real-time pricing in the event a homeowner has to sell sometime soon.
"Many agents have for some time been pricing considerably under the old reval number to represent that we understood the decline in housing values," she said. "Now, will we be pricing far above?? And will today's buyers get what we're doing and why?"
For more information on the recent reassessment go here.
Joyce Haddad
2:17 pm on Tuesday, January 3, 2012
I am curious how they actually decided what houses got a 12% decrease and which ones got a 25% increase. A house that was sold 3 months ago for $900,000 was just reassessed to $725,000. I guess current market values are irrelevant.
Ellena R. Daviet
3:05 pm on Tuesday, January 3, 2012
Folks should not be concerned if their new assessment is 20 to 25 % lower than what they have now. They should if it is not because this Reval is to put a stop to all of the tax appeals that is costing the township a lot of money and they will continue if homeowners think that their propertiey is not worth what it is assessed at. This is the reason that they keep the numbers low. Just as it had litlle to no bearing on what a property sold for before it will also have little bearing on what it will sell for now. A lower number will mean lower taxes and isn't that what we all want?
Elle Daviet
Dave Varga
7:31 pm on Thursday, January 5, 2012
The answer is no to your question. For illustration, lets say your reassessment, along with everyone elses comes in at one tenth (10%) of what it was in 2006. Let's say your house was assessed at 500,000 in 2006. But in 2012 it was assessed at 50,000. The town still has the same expenses and they will increase the multiplier x10 to adjust. Thus you will pay the same amount as before. Except that you will pay a bit more as each year the towns expenses increase.
Stuart Weissman
3:41 pm on Tuesday, January 3, 2012
The confusion here is due to the local leaderships' complete lack of education on the topic of reassessments, how they work and why they are performed. Of course, we should not be surprised. Montclair's Mayor Fried once stated that those appealing their taxes are not being good citizens.
chris
4:04 pm on Tuesday, January 3, 2012
I am sooo confused, Our assessment came in 14% below 2006, and basically right at what we paid for the house two and a half years ago -- we thought very high for the current market and not what we expected. We are thinking of calling to make our case why it should be lowered. We have no plans to sell anytime soon and are concerned what this tax increase is going to turn out to be.
Richard Stanton
3:49 pm on Wednesday, January 4, 2012
Chris, you will want to have sales of comparable homes at your disposal (preferrably in that October 2011 time frame) when you speak to them. If you came out 14% lower, your taxes should increase by about 6.2% ALL other things being equal and assuming the 19% lower total townwide valuation is correct. New tax = new assessment * new multiplier. Therefore, New tax = .86*old assessment * old multiplier * 1.235 (increase in multiplier needed to offset lower town-wide assessment assuming no tax increase- Hah!). So that becomes New tax = 1.062 old tax (old assessment * old multiplier). I think my math is correct anyway.
As was alluded to, I don't think the new values will have much bearing on home prices. That being said, a home with a low assessment vs. that of comparable properties should be worth more on the market as the monthly expenditure on the home (principal + interest + taxes) would be lower.
chris
4:03 pm on Wednesday, January 4, 2012
Thanks Richard, what if you already appealed? Then the amount your taxes increase will be higher, no?
Richard Stanton
11:58 pm on Wednesday, January 4, 2012
That's a great question. I assume the 19% decrease is from last year to this year, not 2007 to now, which would mean that if you were already at market, then you will need to shoulder more of the reduced tax base going forward relative to what you had been paying. I don't think it penalizes you for appealing, it just puts everyone on equal footing going forward assuming everyone is at or close to market values (the only true determinant of which is comparable sales). I'll have to think more about that.
chris
9:56 am on Thursday, January 5, 2012
Ok so I have a theory. Albeit a theory with nothing to prove this, but it seems very strange to me that we were appraised at such a high amount. Someone else mentioned on this thread the question, "how do they determine who has dropped 25% since 2006, who has dropped 11-13% since that time," Well I wonder if they see you have appealed in the last few years they automatically put your appraisal higher so that you end up actually paying what you would be if you hadn't appealed. There is no way our house has not dropped in value in the last two and a half years from the time we appealed.
Also, we called the appraisal agency to make our appointment, FINALLY got through and spoke to an old man in charge who was clueless. We told him we had comps to show our home was over appraised, and he said sometimes land values may appreciate even though houses do not which could explain how our house is flat vs. when we bought it. WHAT?? Every house in town is on land! These are comps one street over! The comment made no sense whatsoever and I really hope some investigative work is done to determine how they are coming up with their numbers. I think many people are going to plotz when they get their tax bill. I love how they aren't explaining how this new assessment translates into taxes but giving this tight window in which to appeal now.
If anyone else appealed in the last few years, I would love to know what did your appraisal come in at -- the high end or the low end?
Stuart Weissman
8:34 pm on Thursday, January 5, 2012
Keep in mind, there's an excellent chance that Appraisal Systems is under assessing all the homes in Montclair. This will make it much more difficult for people to appeal their taxes if the housing market continues to slip downwards. The only way you could possibly get your assessment lower is to prove that comparable homes in your immediate area have sold for less than what the town assessed you at. Good luck doing this when your home is under assessed. It's a dirty practice considering that all revals are supposed to represent 100% market value. But who is going to pay the legal team necessary to stop them from doing this?
By the way, we've been winning our appeals annually since 2006. We have an appointment with AS tomorrow. Our assessment came in about 1% where we were currently assessed, so I'm assuming we are looking at an approximately 18% increase.
Stuart Weissman
10:53 pm on Thursday, January 5, 2012
Check that, Realty Appraisal is the name of the assessment company.