Anyone file "decline in value" for property taxes? Advice?

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financial.freedom
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Anyone file "decline in value" for property taxes? Advice?

Post by financial.freedom » Sat Jan 21, 2017 6:56 pm

Our property taxes increased this year by 2% however the value (as best I can tell, it is a little subjective) declined about 0.5%. I filled out an application to appeal for a decline in value here:

http://assessor.lacounty.gov/decline-in-value/

My hearing is scheduled in a few weeks. At the hearing, they can keep property tax the same, decrease it, or even increase it (although I think due to Prop 13 the maximum increase in one year is 2%). For compiling the data, they refer to Publication 30:

https://www.boe.ca.gov/proptaxes/pdf/pub30.pdf

I am in the middle of compiling data for page 16 of Publication 30 but I'm starting to wonder if this is really worth it. I thought it would "reset" the base value and could only increase 2% per year based upon that (assuming they agree with the decline in value) but then I read the following under FAQs:

If my assessed value is reduced, how long will it last?

Decline-in-value reassessments are not permanent, but last at least one year. The assessed value may decrease or increase depending on the market value of your property on January 1 of each subsequent year. Your assessed value will never increase more than the trended base value. It is important to remember, however, that base year values suspended by decline-in-value reassessment values continue to increase by an annual inflation factor of no more than two percent per year.


Questions:

1. Does the above statement mean it can increase 4% the following year if the average annual increase over 2 years is 2% per year -- or does it permanently reset the base to a lower value and can then only increase from the new lower base value by 2% per year?

2. It is pretty easy for me to locate recent sales in our neighborhood (on Zillow, Redfin, etc.), use the square footage and fill out the data on Pub 30 to demonstrate a decline in value of anywhere between 50-100k depending on how the data is presented. How likely is it that the board will decrease the value if I go to the hearing with this data? In other words, will they just use something less objective, such as stating that I have a better view that is worth 100k more or face the sun or something random and deny my appeal? I have to take a day off work, so want to make sure it is worth my time and effort.


P.S - If you need more info, please let me know. Since the increase is 2%, it would save me 1k property taxes if they agree to a decline of 50k (or 2k in taxes if decline of 100k). I haven't found anyone else who has appealed in the area (maybe that's a bad sign?), so I really appreciate the help!
Last edited by financial.freedom on Sat Jan 21, 2017 10:41 pm, edited 1 time in total.

PoppyA
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Re: Anyone file "decline in value" for property taxes? Advice?

Post by PoppyA » Sat Jan 21, 2017 8:23 pm

I called and complained once. My taxed assessed value was higher than my neighbors, though my home is among the smallest. The appraisers office told me the neighbors had been assessed too low and would need a review!!
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Carefreeap
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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Carefreeap » Sat Jan 21, 2017 8:34 pm

When did you buy your property and for how much?

What is your current assessed value?

What do you estimate the current market value of your home?

I have protested my taxes in CA twice (N. San Diego County) during the recession. We bought in 2005 close to the peak of the market. I was successful in having it dropped by about $150k in value based on a low-ball refinance appraisal in 2009. I didn't care about the refi because we had so much equity it wasn't worth pursuing.

The following year they jacked up the assessed value by $50k and I wrote a letter demanding their comps because in my opinion values may have dropped further or were at least flat and I provided comps. I prevailed.

The assessed value remained flat through 2013.

They started increasing the assessed value by $35k and $50k in 2014 and 2015 respectively. I couldn't protest because they were still below FMV and I wound up selling the house for another $70k over purchase price.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Lindrobe » Sat Jan 21, 2017 8:39 pm

OP, where are you located? I once appealed a property tax assessment, but I had just had appraisal done for a refinance, so I used that to state my case. I won pretty easily.

Also, I am a CPA, so I have some experience with property tax law. If your case is that in general, values are declining in your area, I just can't imagine that an assessor would accept prices from Zillow as evidence to support your case. I could be wrong though.
Last edited by Lindrobe on Sat Jan 21, 2017 9:10 pm, edited 1 time in total.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Dimitri » Sat Jan 21, 2017 8:43 pm

I think the name of the game is comps. If you live in a "tract" community then it should be pretty easy to establish what your house is worth. If you live in a custom home community then obviously it is a bit more difficult. Good luck.
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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Nate79 » Sat Jan 21, 2017 8:55 pm

I don't think you would be taken seriously to think your house value decreased 0.5% using Zillow data. If you haven't compared comps you haven't even started to establish the value of your house.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by 123 » Sat Jan 21, 2017 9:27 pm

The key to using comparable sales is to find historical ones that are shortly before or after the "as of" date for the property valuation appraisal. The board doesn't really care about what's happened since the "as of" date of the property valuation. I don't think they care about the "hocus pocus" valuations of specific properties, including yours, that are by sites like zillow. They would care about the supporting comparables that truly support the zillow evaluation however.
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Re: Anyone file "decline in value" for property taxes? Advice?

Post by dumbbunny » Sat Jan 21, 2017 9:32 pm

If you didn't just buy your house, then you will have to go with comparative market value (comps). I just bought last March and used that figure for the market along with the appraisal report on the house. The difference between what I paid and the appraisal report was $5K but it was $90K under the county's real market value. After talking with the tax assessor's office I filed an appeal upon their recommendation. It's worth the effort only if the county overvalues your property. I estimate I will save about $700 in property taxes if I win the appeal and that is the same amount that I paid for the appraisal. Good luck.
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Re: Anyone file "decline in value" for property taxes? Advice?

Post by donall » Sat Jan 21, 2017 9:37 pm

Doesn't hurt to try, but small percentage amounts are often ignored by board of appeals.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by prudent » Sat Jan 21, 2017 9:38 pm

Our county lists the properties that they themselves used as comps. So I researched those properties and went to the appeal with information and photos (thanks, Google satellite view!) that tried to support my claim that each of them in some way were better than mine. One had the same size lot but theirs was 100% usable while ours was not. One was on a cul-de-sac, mine is not. Another had one more bathroom. Worked OK, got an worthwhile reduction in assessment.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by financial.freedom » Sat Jan 21, 2017 10:34 pm

Carefreeap wrote:When did you buy your property and for how much?

About a year ago for 1.55 M

What is your current assessed value?

1.58M

What do you estimate the current market value of your home?

1.5M (80k less than their assessment)

I have protested my taxes in CA twice (N. San Diego County) during the recession. We bought in 2005 close to the peak of the market. I was successful in having it dropped by about $150k in value based on a low-ball refinance appraisal in 2009. I didn't care about the refi because we had so much equity it wasn't worth pursuing.

The following year they jacked up the assessed value by $50k and I wrote a letter demanding their comps because in my opinion values may have dropped further or were at least flat and I provided comps. I prevailed.

The assessed value remained flat through 2013.

They started increasing the assessed value by $35k and $50k in 2014 and 2015 respectively. I couldn't protest because they were still below FMV and I wound up selling the house for another $70k over purchase price.


Thank you for the reply! Maybe it is worth pursuing.

financial.freedom
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Re: Anyone file "decline in value" for property taxes? Advice?

Post by financial.freedom » Sat Jan 21, 2017 10:37 pm

Lindrobe wrote:OP, where are you located? I once appealed a property tax assessment, but I had just had appraisal done for a refinance, so I used that to state my case. I won pretty easily.

Also, I am a CPA, so I have some experience with property tax law. If your case is that in general, values are declining in your area, I just can't imagine that an assessor would accept prices from Zillow as evidence to support your case. I could be wrong though.


Thank you for the reply. I am using Zillow, Redfin, etc. to find recent sales not using their calculators. Based on those sales, I am using the data to fill out the worksheet in the PDF above (Pub 30) and calculate the assessed value. Basically the price per sq foot of the other homes in our area was less so our assessed value is less. Located in LA County.

financial.freedom
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Re: Anyone file "decline in value" for property taxes? Advice?

Post by financial.freedom » Sat Jan 21, 2017 10:39 pm

Nate79 wrote:I don't think you would be taken seriously to think your house value decreased 0.5% using Zillow data. If you haven't compared comps you haven't even started to establish the value of your house.


Sorry, let me clarify -- I only used Zillow, Redfin, etc. to find the recent sales. Will edit my post.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by financial.freedom » Sat Jan 21, 2017 10:43 pm

123 wrote:The key to using comparable sales is to find historical ones that are shortly before or after the "as of" date for the property valuation appraisal. The board doesn't really care about what's happened since the "as of" date of the property valuation. I don't think they care about the "hocus pocus" valuations of specific properties, including yours, that are by sites like zillow. They would care about the supporting comparables that truly support the zillow evaluation however.


I'm using Zillow and Redfin only to locate the recent sales in the area and cross-check square footage, then putting that data onto Excel spreadsheet to average the price per sq foot (and other items listed on Pub 30).

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by financial.freedom » Sat Jan 21, 2017 10:45 pm

prudent wrote:Our county lists the properties that they themselves used as comps. So I researched those properties and went to the appeal with information and photos (thanks, Google satellite view!) that tried to support my claim that each of them in some way were better than mine. One had the same size lot but theirs was 100% usable while ours was not. One was on a cul-de-sac, mine is not. Another had one more bathroom. Worked OK, got an worthwhile reduction in assessment.


Great suggestion, thank you! I will ask for the properties that they used as comps.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Carefreeap » Sat Jan 21, 2017 11:14 pm

financial.freedom wrote:
Carefreeap wrote:When did you buy your property and for how much?

About a year ago for 1.55 M

What is your current assessed value?

1.58M

What do you estimate the current market value of your home?

1.5M (80k less than their assessment)

I have protested my taxes in CA twice (N. San Diego County) during the recession. We bought in 2005 close to the peak of the market. I was successful in having it dropped by about $150k in value based on a low-ball refinance appraisal in 2009. I didn't care about the refi because we had so much equity it wasn't worth pursuing.

The following year they jacked up the assessed value by $50k and I wrote a letter demanding their comps because in my opinion values may have dropped further or were at least flat and I provided comps. I prevailed.

The assessed value remained flat through 2013.

They started increasing the assessed value by $35k and $50k in 2014 and 2015 respectively. I couldn't protest because they were still below FMV and I wound up selling the house for another $70k over purchase price.


Thank you for the reply! Maybe it is worth pursuing.


OK so the difference is $80k, or $800 in tax payment + prob another in other special assessment fees to get to your $1k tax payment difference.
Present your comps as pulled from the internet sites. Guessing the County/City will meet you half-way. Net result will be $500.

Soooooo what do you do for a living and how much is your time worth?

I ask this because I went through this exercise with a property we own in AZ. I got the "split the difference" response from the County and added up my time to do the research, copies, letter, et cetera. And I took their offer. :wink:

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by financial.freedom » Sun Jan 22, 2017 2:59 am

Carefreeap wrote:
financial.freedom wrote:
Carefreeap wrote:When did you buy your property and for how much?

About a year ago for 1.55 M

What is your current assessed value?

1.58M

What do you estimate the current market value of your home?

1.5M (80k less than their assessment)

I have protested my taxes in CA twice (N. San Diego County) during the recession. We bought in 2005 close to the peak of the market. I was successful in having it dropped by about $150k in value based on a low-ball refinance appraisal in 2009. I didn't care about the refi because we had so much equity it wasn't worth pursuing.

The following year they jacked up the assessed value by $50k and I wrote a letter demanding their comps because in my opinion values may have dropped further or were at least flat and I provided comps. I prevailed.

The assessed value remained flat through 2013.

They started increasing the assessed value by $35k and $50k in 2014 and 2015 respectively. I couldn't protest because they were still below FMV and I wound up selling the house for another $70k over purchase price.


Thank you for the reply! Maybe it is worth pursuing.


OK so the difference is $80k, or $800 in tax payment + prob another in other special assessment fees to get to your $1k tax payment difference.
Present your comps as pulled from the internet sites. Guessing the County/City will meet you half-way. Net result will be $500.

Soooooo what do you do for a living and how much is your time worth?

I ask this because I went through this exercise with a property we own in AZ. I got the "split the difference" response from the County and added up my time to do the research, copies, letter, et cetera. And I took their offer. :wink:


I think the 1k tax reduction (or if they split it as you say and becomes $500 reduction) is additive, right? Since Prop 13 limits the amount they can increase property taxes to 2% per year, then every year there is an increase in value I am saving another 1k (plus the difference of 2% times a new lower base value). Over 30 years, that could add up. This is assuming property values continue to increase over the next 30 years.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Mudpuppy » Sun Jan 22, 2017 4:04 am

financial.freedom wrote:1. Does the above statement mean it can increase 4% the following year if the average annual increase over 2 years is 2% per year -- or does it permanently reset the base to a lower value and can then only increase from the new lower base value by 2% per year?

Yes, it could go up by 4% the following year if the market supports than increase. My property has been underwater since a year after it was purchased. My Prop 13 basis value has increased annually and is currently about $100k more than my house's market value. So that means my property tax "current value" is pretty much tracking market value each year, since market value is below my basis value.

The largest annual increase I've had was about a 40% increase a few years back. That was due to a combination of a strong recovery and because the assessor's office had skipped reassessing to current market value the year prior. So I got one year of below-market value for property taxes, then one big leap up to current market value. It threw the mortgage servicer's escrow calculations for a real loop, but wasn't too horrible otherwise since I was tracking house values and knew a big adjustment was coming.

financial.freedom wrote:2. It is pretty easy for me to locate recent sales in our neighborhood (on Zillow, Redfin, etc.), use the square footage and fill out the data on Pub 30 to demonstrate a decline in value of anywhere between 50-100k depending on how the data is presented. How likely is it that the board will decrease the value if I go to the hearing with this data? In other words, will they just use something less objective, such as stating that I have a better view that is worth 100k more or face the sun or something random and deny my appeal? I have to take a day off work, so want to make sure it is worth my time and effort.

This is a question best asked of other LA County residents who have appealed their current value. Even though all counties are controlled by the same California state laws, interpretation of real estate can be subject to local variations. Your "face the sun" example is unlikely, but local "micro-zones" in real estate, such as being beach-side vs being two blocks away from the beach, could factor in. You'll want to screen your selected comps carefully to make sure they really are close to your property.

financial.freedom wrote:I think the 1k tax reduction (or if they split it as you say and becomes $500 reduction) is additive, right? Since Prop 13 limits the amount they can increase property taxes to 2% per year, then every year there is an increase in value I am saving another 1k (plus the difference of 2% times a new lower base value). Over 30 years, that could add up. This is assuming property values continue to increase over the next 30 years.

I thought you said you were doing a decline in value appeal. That will not reset your Prop 13 basis value. Your basis value will continue to be your sales price and will continue to rise by the lesser of the California inflation index or 2% each year. A decline in value appeal just reduces the tax bill for the current tax year. You have to do the same song and dance every single year if you think you're being assessed incorrectly.

If you are actually doing a basis value appeal (e.g. change of ownership appeal in Publication 30), those are rarely successful in cases of a sales, unless they made a mistake recording the sales price and you're appealing to correct the mistake. They assume you would pay only fair market value for the home, so your basis is your sales price. Basis value appeals are more successful in cases of property improvements that have been overpriced by the assessors office (e.g. new construction appeal in Publication 30).

financial.freedom wrote:I'm using Zillow and Redfin only to locate the recent sales in the area and cross-check square footage, then putting that data onto Excel spreadsheet to average the price per sq foot (and other items listed on Pub 30).

Using Zillow or RedFin as a source of comps may be problematic in terms of determining if it was an "arms-length open market transaction" (see page 15 of Publication 30). That sort of information is not always found on Internet sources. You may want to research each comp you've chosen on the assessor's website and see if you can find more information about the transaction.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Carefreeap » Sun Jan 22, 2017 11:32 am

Mud puppy is spot-on.

They are going to look at your "appealed" assessment every year until they get back to your purchase price. Then it will revert to the 2% limit.

For example, someone could have a fire burn down their structure and get a temporary reduction in value during the two years or so it would take to rebuild. Then the assessment would revert to the pre-burned down value. That of course is an over-simplification of the process as some people would take advantage of the opportunity and build bigger and better and that next increase would likely trigger a reassessment on the net improvement.

But I hope you get my point. There is no 2% limit on the temporary assessment, hence the term "temporary". You're going to need to look every year at the assessment notice and determine whether it's worth your time to appeal.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Frisco Kid » Sun Jan 22, 2017 12:35 pm

Given you are Prop 13 with a greatly reduced tax base is this even worth your time or am I missing something?

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Gill » Sun Jan 22, 2017 4:22 pm

Frisco Kid wrote:Given you are Prop 13 with a greatly reduced tax base is this even worth your time or am I missing something?

I agree. Aren't we really talking peanuts?
Gill

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by curmudgeon » Sun Jan 22, 2017 4:35 pm

Gill wrote:
Frisco Kid wrote:Given you are Prop 13 with a greatly reduced tax base is this even worth your time or am I missing something?

I agree. Aren't we really talking peanuts?
Gill

Prop 13 doesn't work that way. If you are a recent purchaser, you are paying full base rate. Prop 13 only limits future increases.

My county was pretty good about dropping assessments during the downturn, but the prop 13 limits continued to rise all along, and when values recovered the assessments went up to purchase price plus (2% * price * yrs owned).

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by stan1 » Sun Jan 22, 2017 5:04 pm

I too live in California. I think you are on the right path. Gather recent sales data from nearby houses and submit the form. I don't think you have anything to lose other than your time. They may accept your data and there won't be a hearing. If they do want a hearing then you can decide whether its worth more of your time. It's not 2010 so they don't have hundreds of thousands of homeowners filing but I'm sure you aren't the only person who bought high in the current market. You might have to appeal again in another few years if the assessed value of the house is still above comps at that time. A lot of homeowners back in 2008-2011 did just that.

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by snackdog » Sun Jan 22, 2017 5:18 pm

I have appealed successfully by letter in Contra Costa county. Be sure you know the rules in your county. For mine I needed to provide strong comps which:
- sold within 90 days of Jan 1
- were within 1/2 mile of my house
- were within about 200 sq ft of mine
- same beds/baths
- similar lot size
- similar construction year

I live in a 100% custom home neighborhood of wildly varying lot sizes and home ages so it was not easy. I then pulled all the possible comps and put each of my favorites on a page each with photos and comparison to mine. I pointed out all the horrible faults of my house (original 1965 interior, poor lot, leaking roof, etc). It worked. The assessor emailed me directly and said he would drive by the house and the comps. Dropped the assessment quite a bit as I recall.

But the last several years I couldn't find any comps to justify lowering the value as it already seems under FMV.

Good luck!

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by David Jay » Sun Jan 22, 2017 5:29 pm

snackdog wrote:I have appealed successfully by letter in Contra Costa county. Be sure you know the rules in your county. For mine I needed to provide strong comps which:
- sold within 90 days of Jan 1
- were within 1/2 mile of my house
- were within about 200 sq ft of mine
- same beds/baths
- similar lot size
- similar construction year

I live in a 100% custom home neighborhood of wildly varying lot sizes and home ages so it was not easy. I then pulled all the possible comps and put each of my favorites on a page each with photos and comparison to mine. I pointed out all the horrible faults of my house (original 1965 interior, poor lot, leaking roof, etc). It worked. The assessor emailed me directly and said he would drive by the house and the comps. Dropped the assessment quite a bit as I recall.

But the last several years I couldn't find any comps to justify lowering the value as it already seems under FMV.

Good luck!


The problem is that the OP has an actual sale one year ago. That is a very hard baseline to overcome.
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Re: Anyone file "decline in value" for property taxes? Advice?

Post by financial.freedom » Mon Jan 23, 2017 2:39 pm

Thank you for all of the great replies! Yes, I am appealing for a "decline in value" instead of lowering the base value. I understand now that the base value for Prop 13 purposes will remain the same, a decline in value would only be temporary, and if the County increases valuation for taxes in subsequent years I'd have to go through the same song and dance each time.

We did purchase at a bit of a high point (there were other people bidding against us), and I can demonstrate why our property is worth less than other comps (cracks in driveway which is falling apart and needs to be repaved, roots through the sewer line that has to be replaced, no gutters leading to standing water when it rains, etc.). Our price per sq ft is already higher than comps, so I think we can make a strong case. I've emailed the assessor for the case and asked her for the comps that the County used for the most recent valuation. Thank you again!

FF

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Re: Anyone file "decline in value" for property taxes? Advice?

Post by Rodc » Mon Jan 23, 2017 4:48 pm

donall wrote:Doesn't hurt to try, but small percentage amounts are often ignored by board of appeals.


I am sure it depends on where you are, but +/- 0.5% is noise.

In our state the assessments only have to be accurate to +-10%, and really, how accurate can an assessment be? No one knows to much better than that until they put the house on the market.

This also may depend on where you are, but here the total prop tax amount to be collected for the town is set. The total assessed value for the town is computed. The tax rate is then total tax/total prop value. There is a limit in that the total tax collected can only go up by 2.5% (plus any new property). So if all the properties drop in price by 50% the tax rate doubles and your tax stays the same + the allowed 2.5% increase. If all property goes up in price by 100%, your tax stays the same + the allowed 2.5% increase.

FWIW: I think this makes sense - if property values drop 50% are you going to lay off half the teachers, police and firemen? Or if values double are you going to double the tax haul? No, the town budget is fairly stable, going up with inflation and population (new growth).

Only if for some reason your property goes up or down substantially differently from the other property will it make much difference.

Also, assessments tend to lag about 2 years (here). The town spends a year collecting a year of sales data. They spend maybe 6 months building the assessment model (this much for land, this much per bedroom, this much for a 2-car garage, etc.) then 6 months getting the state to approve the assessment model. So, when values are rising everyone feels like they got a great assessment because it is the old lower value. When values are dropping, they think the assessments are wrong because they are the older higher values. You need to show you assessment is wrong by enough to be significantly not just noise compared to the data used to build the model. And while we are supposed to be assessed at "full value" (+/- 10%) they shoot for being about 5% low so it is very hard to win a tax abatement claim.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.

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