Archive for the 'Housing Prices' Category
West Hartford Revaluation 2011 – Informal Hearings
West Hartford’s 2011 revaluation is progressing smoothly, and reached the public phase when Market Value letters began arriving during the second half of November.
Before going any further, it is very important to emphasize three key points:
1. Property taxes don’t change until July 2012.
2. Taxes would be calculated based on the “New Property Assessment” in the bottom right of the letter, not the market value.
3. The mill rate will change, so multiplying the current mill rate by the “New Property Assessment” is not a reliable estimate of future taxes.
Although the overall timeline extends through spring and into July, there is immediate action required for West Hartford homeowners who are concerned about the Market Values assigned to their properties.
The Town will be holding informal hearings on proposed market values through most of the month of December. Owners who wish to challenge their value need to call 860-561-7598 by Friday 12/9/2011 between 9:00 and 4:00 in order to schedule a one-on-one appointment.
Once you’re on the schedule, you should gather some market data to support your contention that the market value assigned to your property is too high. There are a couple of primary sources of information. The Assessor’s office has a number of large binders on their public tables in which you can look up sales information. They have also loaded the new market values of all the properties in town into the Vision Database. Finally, real estate agents can also help by gathering data through the MLS.
We have been in contact with the Assessor’s office in an effort to understand the big picture results of the revaluation. Most importantly, we have asked for their rough projections of what the mill rate would be if the current proposed market values held, and if the Town budget remained flat. We have also asked for data that will (hopefully) allow us to run different projections and scenarios of our own.
Until the Assessor’s office comes though with some information, our observations are limited to what we discover by looking at the market values of individual homes through the Vision system.
Most properties that we have reviewed showed a decreasing market value compared to the previous year, which is actually the value of the property according to the 2006 revaluation. Decreasing market values make sense since the market has definitely weakened over the past five years.
Comparing the new market value to the old market value is interesting, but not terribly useful. After the 2006 revaluation the Town decided to phase in the new values, but later froze the phase-in after the second year. The result of this decision is that for many homeowners the new market value is actually higher than the one on which their taxes are currently calculated.
For example, one home in Town was assigned a value of about $280k in the 2006 revaluation. Two years into the phase-in the taxable market value had increased to about $210k – still considerably below fair market. That value got locked in once the phase-in was frozen. Revaluation 2011 has set the value of this home at about $270k, so even though the market value has fallen since 2006, it’s still going to experience a step up in taxable market value. (We know this is confusing, it took us quite a while to understand, and model, the 2006 phase-in. Please feel free to email questions or post them in the comments.)
The revaluation has not treated all homes that sold in 2011 equally. Some properties that sold were assigned their sales price as the market value, which seems quite reasonable. Others were not … we saw one that was assigned a value meaningfully lower than the sales price.
That’s all we have for the moment. Check back in over the coming weeks – we’ll post additional information and analysis as it is available. And West Hartford homeowners, don’t forget to review the proposed market values in the letters you received and decide if you want to challenge your values.
Related Posts
West Hartford Revaluation
West Hartford Revaluation, Part II
Property Taxes and Revaluations
Hartford’s Revaluation 2011 – Update
On Thursday, December 1st, updated market values began arriving from the City of Hartford. We were eagerly awaiting our letter because, well, real estate things get us excited and the revaluation is important. Now it’s here and it’s time to go to work interpreting what it all means.
Proposed Fair Market Value
The first important point to make is that the numbers sent by the City have no immediate impact on our property taxes. They are an important milestone in the revaluation process that will show up in our July 2012 tax bills.
The values in the letter are also market values rather than assessed values. So the number you received is the value at which the City believes your home would sell in the open market. The value on which our homes are actually taxed is a much lower number, the assessment, which over the past few years has been less than 30% of the market value assigned in 2006. We do have an opportunity to challenge the new market values, if we feel they are unfair, which will be discussed below.
Over the next few months the City will finalize the market values for all the properties in the City in order to create the 2012 Grand List. Homeowners that do challenge their market values, and are not happy with that outcome, can appeal the initial result to the Board of Assessment Appeals. Please see your letter, and the City website, for more information.
Determining the assessment ratio for the residential property class is the next challenge for the Assessor. The letter notes that it will be established by the end of January, though it will depend on the Grand List, so a final number probably won’t be available until all market value appeals have been completed. Hopefully the January number will be a good estimate based on a mostly complete Grand List. Multiplying our market values by the assessment ratio of residential property will give the assessed value on which we’ll pay our taxes.
In May, the City Council will review the City budget. They will back into the mill rate needed to fund the budget based on the assessed values of all the properties in town. And in July we’ll receive our new tax bills that reflect the results of Revaluation 2011.
Immediate Action
Over the next few weeks the market values are still open for discussion. Homeowners who want to challenge their values, or at least get an explanation, need to set up an appointment. The “informal hearing” appointments are held with the CLT Division of Tyler Technologies, who can be reached weekdays from 8:30 to 4:30 at 877-394-3379. Appointments must be requested by December 15th.
Homeowners choosing to discuss their values are expected to bring data and evidence to support their position. The letter we all received notes that “a change in value will be considered if the owner is able to demonstrate that the appraised value is in excess of market value.”
The primary source of market value data is the sales records that are kept Downtown in City Hall. Specific properties can be researched using the “On-Line Data” link in the right column of the Hartford Assessor page. The Assessor’s office intends to publish the Proposed Fair Market Values of all properties on this site so that owners have an easy way to perform their research.
Real estate agents are another source of market value information. We successfully challenged our market value in 2006, and are happy to help homeowners make a case for the lower valuation.
Initial Observations
We have heard from a number of Hartford homeowners already, and the clear consensus is that assigned market values have fallen from the Revaluation 2006 numbers. That’s to be expected, as the actual market values in the neighborhood have fallen.
Values of the individual homes do seem to deviate from what we feel are their actual values. Some owners have surprisingly low values, while others are a little too high for the current environment.
More interesting is the big picture. Hartford has three assessment buckets that each have their own assessment ratios: residential, apartment, and commercial. The State legislature passed a bill in June that set the assessment ratios for the coming tax year at 50% for apartments and 70% for commercial. The residential assessment rate was capped such that homeowners would be responsible for no more than an additional 3.5% of the tax burden due to the revaluation. At the same time, the assessment ratio for residential has a floor of 23%.
Under the new system, apartment buildings will definitely have higher property taxes. That assessment class was expanded to include 4 family buildings, and the assessment ratio was increased from about 37.6% to 50%. Commercial buildings will continue to be assessed at 70%, but will no longer have an additional surcharge on top of that.
The wildcard in the whole process is how much commercial values fell compared to residential values. That will drive the residential assessment ratio, and play a big role in determining where the mill rate needs to be set in order to fund the budget.
The Courant’s Ken Gosselin published a story over the weekend which noted that the Assessor has not yet analyzed the impact of proposed fair market values on the different property classes. We have been in touch with the Assessor’s office too, asking for both their projections on the residential assessment ratio and likely mill rate. We have also requested the big picture market value data so that we can do our own analysis. Please keep an eye on this site in the coming weeks; we will publish additional information and findings as they are available.
In the meantime, take a second look at the letter you received from the City about your property’s proposed fair market value. If you are concerned that it might be too high, then it is in your best interest to look into the matter further — and we are happy to help if needed.
Related Posts
Overview of Hartford’s Property Tax System
100 Years of Inflation
As part of our home’s 100 year birthday celebration, we learned that the original cost to build the structure in 1911 was $8,000. Starting with that data point, I tried to do some figurin’ to see how much that is in today’s dollars.
Doing the calculation in my head was a very bad idea. Without actually thinking about it very much, I jumped to the conclusion that the $8,000 was “like a million bucks” in today’s dollars – it just seems like so much money for that long ago. Though, full disclosure, I wasn’t alive 100 years ago, so I don’t have a good sense of how much people earned or how much everyday items cost.
It turns out that adjusting $8,000 for 100 years worth of inflation results in a present day value of less than $190,000. (The government websites only go back to 1913, so I ended up using Tom’s Inflation Calculator – the results were consistent with each other). Far, far less than my initial guess.
Although I find this interesting, and perhaps you do too, it has no impact on the current market value of the home. None what-so-ever. Really, no cost information does.
Buyers don’t care how much the house cost to build 100 years ago. They don’t care about how much that new roof, furnace, or family room addition cost either. And they still wouldn’t care even if all of these projects were done last year.
Sellers are on the receiving end of this kind of logic too. Buyers like to take the current asking price and reduce it by the full cost of the improvements they feel need to be made. If they started with the estimated value of the home once the work was complete it might be more relevant, but they usually don’t.
I just wanted to get that out there – trying to justify a bid or asking price with cost information is an uphill battle. You’re more likely to have success with recent comparable sales and homes that are still available for sale. But even then it can still be a struggle to get buyers and sellers to agree on a price.
West Hartford Revaluation 2011, Part II
The other day we covered the basics of the upcoming West Hartford property revaluation. As a quick reminder, the process is underway, and new “Market Values” will be available and distributed in the October time frame. Homeowners with concerns about their number can go through the “Informal Hearing” process and appeal it beyond that if needed.
Phasing In Market Values
We tried to keep things simple last time, focusing on the basic revaluation process and timeline. This required leaving out an important detail about how the 2006 revaluation was implemented. When the updated Market Values were released in the fall of 2006, residents learned that property values had increased dramatically since the previous revaluation in 1999. Rising property values are usually a good thing for owners, since it increases the equity in their home. However, this time there was a catch.
The revaluation found that residential property increased in value more than commercial property, which meant that homeowners would pay higher taxes as they collectively took over some of the tax burden from commercial property owners. In addition, residential property appreciation varied by house, which meant that homeowners with the largest gains in home value would see an even larger increase in property taxes.
West Hartford decided to use a Phase-In to more gradually transition to the new Market Values. Phase-Ins are relatively common, and increase the taxable market value of a property in stages so that owners with the biggest gains in property value aren’t hit with large tax increases all at once.
The Town allowed taxable values to increase by a maximum of 25% in the first year. Since nearly all homes had appreciated by more than 25%, the remaining change in Market Value was distributed equally to years 2 – 5 of the phase-in. By Grand List 2011, everyone would be taxed based on their 2006 Market Value.
Freezing the Phase-In
Public concern about the revaluation grew over the first two years, and focused on two main points. First, that the October 2006 revaluation date may have been the peak of the market. Some argued that the values were unfair because homes couldn’t be sold at those prices less than two years after they were set. The second concern was that homeowners were being taxed on unrealized gains. Owners didn’t have any extra money in their pockets from their home’s appreciation, so how could they afford to pay their increased taxes without selling their home? The argument typically used long-time residents who were on a fixed income as examples. The Town Council voted to freeze the phase-in after the second year, locking in the Grand List 2007 values.
Many of the effects of freezing the phase-in were correctly identified in real time at public meetings. Residential property had increased in value more than commercial property, so freezing the phase-in shifted more tax burden to businesses, which were struggling with a weakened economy. It also shifted more of the burden to motor vehicle owners. Finally, homes with less than average appreciation ended up paying more taxes than they otherwise would have, while homes with more than average appreciation paid less than they otherwise would have.
In the two years since the freeze was implemented, we’ve learned even more about the effects. One of the most interesting is that the revaluation was not done at the peak of the market. Average prices continued to rise through 2007 even though the number of transactions was already falling. Although we didn’t publish the chart, the trend was similar in West Hartford. Additionally, the decline in prices over the subsequent down years has not been nearly as steep in West Hartford as it has in other areas of the region or the country. The value of many homes continues to be fairly close to the numbers identified in the 2006 revaluation.
As a specific example, consider a very typical 3 bedroom, 1.5 bath home in West Hartford Center. The 1999 revaluation set the Market Value at $148,600. Revaluation 2006 determined that it had appreciated to $280,286. The property had sold a couple years before for about that price, so in this case the Assessor did pretty well.
Revaluation 2011 will likely show that its Market Value has not changed dramatically. This particular home was recently listed for sale again, at right around $300,000, and went under contract very quickly, as most do in this price range. However, because the phase-in was frozen, the home is on the tax roles as being worth $209,384.
Analysis of Grand List data from the Assessor’s office shows that had the Phase-In been completed as planned, the mill rate for the coming year would be about 32.65 rather than 39.44. We calculated this number by removing the Phase-In Exemptions from the assessed values and then allowing the mill rate to decrease until the property tax revenue equaled what the Town expects to raise in the coming year. Our estimated mill rate may not be exactly right, but it’s close.
Planning for the Fall
Owners are in a similar position as 2006 when looking towards the 2011 revaluation. Within the residential side of the Grand List there are large variations in how home prices differ from the frozen phase-in values. Changes to the commercial side of the Grand List, which makes up 16.4% of property values in town, are also uncertain. It is difficult to project how the tax burden may shift. It seems prudent to wait until the fall to understand exactly where we stand before getting too concerned about different possibilities.
In the meantime, residents need to understand a few key points. The revaluation will begin to go public in the fall, and individual home owners will have an opportunity to challenge their Market Values. There will hopefully be a public discussion about how to transition to the new Market Values. Finally, if the Phase-In had been completed (rather than being frozen), the order-of-magnitude tax impact on owners would have been in the +5% to +10% range, though it would have varied considerably based on the assessment of individual homes.
Are Real Estate Websites Your Friend?
Real estate websites came up in yesterday’s post. The basic question was, “Can buyers rely on public real estate websites during a home search?” I think we can all agree that they’re fun to look at, and they do a very nice job at presenting and consolidating data. But do they have a buyer’s (or seller’s) best interests in mind?
I don’t think they do. Their goal is to make money. Basically all the sites make money by selling advertising to realtors, mortgage lenders, and credit people. They want to generate as many page views and clicks as possible, since that’s what translates into revenue. Buyers are heavy users during their search, but once they get a home under contract they no longer need to keep their preferred site open in the browser tab all day at work.
It comes down to an alignment of incentives. The public websites need to be engaging enough to capture a buyer’s interest, but not so helpful that they find a home immediately and are no longer a user (potential source of revenue). They benefit from extended home searches.
There are a few different ways that sites disrupt the search process, whether it’s intentional or unintentional:
Data Lag: Listing information is updated on different schedules for different sites. In all honesty, this could be related to how the different MLS systems (realtors) around the country make their data available. All I know is that some sites are faster than others.
Not Clearly Marking Homes Under Contract: We get a lot of calls about listings people see online that are already sold. They’re not closed yet, but the seller has already accepted a bid from a buyer. Getting distracted, or even emotionally hijacked, by a property that’s not really available causes buyers to miss out on legitimate opportunities.
Suspect Valuation Estimates: One site in particular touts their ability to value any property in the Country. Our experience is that buyers who take these valuations too seriously are unable to make realistic bids and have trouble buying a home. The estimates are inevitably too low, and the buyer isn’t going to “overpay,” so they keep lowballing sellers and never get a home.
Distressed Properties: Introducing distressed properties into the mix makes buyers more uncertain. Some try to use foreclosure pricing to support bids on non-distressed properties, which is generally not effective in this area. Others decide they want to pursue a foreclosure, not realizing that the process can be very different and it may take months to get a response.
Despite these concerns about the public real estate sites, I think they’re entertaining and provide a valuable service. They each have their own angle, and generally do a nice job presenting their data. As long as home buyers recognize the motivations and potential weaknesses of each site, they should definitely feel comfortable using the one they like best.
In the comments of yesterday’s post, Michael suggested that the realtors offer the general public the opportunity to subscribe to the actual MLS. It’s an interesting idea, and could be a way to reduce the (modest) annual fees that agents pay to support the existing system. I wonder if the local board has considered that possibility? Anyone from GHAR reading today? In some ways the realtor.com site is just that … the data is updated very frequently and comes directly from the MLS. However, it’s also like all the other sites in that there are ads and attempts to collect contact information.
Even this site has an agenda, though our incentives are much more aligned with our clients. We only benefit when someone successfully completes their transaction … so hopefully the GHREB can still be your friend.