Over the last few years in Massachusetts as well as many other parts of the country we have seen a rapid
decline in Real Estate values. In many towns around Metrowest Massachusetts it would not be unusual to see a home that sold in 2007 for $500,000 to be re-sold today around $450,000. It is an unfortunate fact of life. All good things tend to come to an end at some point.
One of the common lines of thinking that occurs when Real Estate values are heading downward is that the home owners tax bill must also be coming down too. Part of this misconception occurs because people assume that the fair market value and assessed value are the same.
In theory this should be the case but assessed values are nothing more than a yard stick for a municipality to collect an appropriate amount of taxes to sufficiently cover the state and local appropriations chargeable to the city and town.
Lets go over a few facts about your homes assessed value and the role of the towns assessor:
1.) In Massachusetts assessed values are based on 100% of full market value.
2.) Town Assessors are required to submit assessed values to the state Department of Revenue for certification every three years.
3.) The assessors review sales data and the Real Estate market every year and thereby reassess values each year.
4.) Assessors do not raise of lower taxes.
5.) Assessors do not make the tax laws which affect property owners.
6.) The Assessor's Office has nothing to do with the total amount of taxes collected.
7.) The assessor's primary responsibility is to find the full and fair market value of the property so that the taxpayer pays only their fair share of taxes.
As we head toward January, there is no doubt that you will see the assessed value of many homes coming down across Massachusetts. What you are also very likely to see is an increase in the fiscal tax rate to cover the difference in the lower assessed values.
As previously mentioned above, the numbers used are all just part of the game of collecting the proper amount of revenue to run the town.
So what are you supposed do if you think you are not being taxed properly in relation to other similar 
homes that have sold?
You should go to your local tax assessors office and file for an abatement. All the information necessary regarding the application process and the deadlines for filing should be available.
Applications for abatement's are due on or before the due date for payment of the first actual bill. The assessor has up to three months in Massachusetts to act upon your abatement request.
What happens if you do not feel that the assessor made the proper ruling on your abatement request? If this occurs, you have the right to appeal to the State Appellate Tax Board.
In Massachusetts there are some who are exempt from all or part of their property tax obligations. Exemptions are available to those individuals that meet the various requirements in the following categories:
- Elderly
- Disabled Veteran
- Blind
- Widows and/or Widowers
- Minor Children with a Deceased Parent
- Minor Children of Deceased Police or Firefighters killed in the line of duty
Applications for tax exemptions can also be obtained from your local tax assessor's office.
In Massachusetts senior citizens have also been able to claim a refundable credit on their income taxes for property taxes paid on residential property owned or rented. This law is known as the Senior "Circuit Breaker" Tax Credit, it is equal to the amount by which their property tax payments in the current tax year (excluding any exemptions and/or abatement's), including water and debt sewer charges, exceed 10% of their total income for the same year.
To claim the credit, eligible taxpayers must submit a completed state Schedule CB, Circuit Breaker Credit, with their state income return. The form is available on the web at Circuit Breaker Credit.
As a Realtor who has covered local Metrowest Massachusetts Real Estate for the past twenty three years I often come across some really silly marketing by other Real Estate agents in regards to a homes assessed value. Things written in the Multiple Listing Service (MLS) like "What a bargain this home is priced X dollars below assessment." Most of the time the Realtor is making a very poor correlation between the assessed and market value.
When I see something like this my immediate thought is that the home owner has been paying too much taxes on their home or the assessment has not been adjusted yet.
In just as many circumstances I have seen a home with a lower assessment and a buyers Realtor try to argue that the home is overpriced because of a low assessment.
The take home message is that if you are considering buying a home, you should not rely on assessed value as a good measuring stick of market value. There are plenty of homes that are over and under assessed in Metrowest Mass. Hiring a good buyer's agent that can point point a homes true market value is always a wise move!
See also: Assessed home value v.s fair market value
______________________________________________________________________________________________________
About the Author: The above information on assessed home values rarely equal fair market value was
provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356.
Have a home to sell in Metrowest Mass? I have a passion for Real Estate and love to share my marketing expertise!
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Bill, We have companies here who grieve taxes for people every year....if they win they get half. They usually don't win :( This is good advice and some very helpful links for those in Massachusetts to hopefully get their taxes down.
Carole - It seems there are always companies out there that will handle a task like this and charge someone for it when it could be easily taken of by the home owner or even a Realtor they may know for FREE.
Bill, we have the same situation here, some townships are open to reducing the tax rate and others forget it. There are 3 in my area that just refuse. I have pulled comps for many past clients in the last year and now I know which ones it is just a waste of time. It really is a shame to be paying taxes on a home that is assessed over what the client paid.
Missy the biggest problem with assessed value is that too many people try to draw a correlation between the number and actual market value. There is almost always a disparity whether it is because of the lag in time from when the assessment was done or whether the assessed value was never close to the real value to begin with.
The other thing people forget is that there are factors which will drive up as assessment but not the market value. A home with 5 acres of wetland will be assessed much greater than the home with one acre all things being equal. The home with the 5 acres of wetland most likely will not have a great market value than the home with one usable acre. This is one quick example.
This is an excellent post and I hope that it is featured. One of the huge flaws in tax evaluations is that when the market goes down the Taxing Authority is slow to follow and if Mass. is like Tx. and uses a mass appraisal approach, the values are even more out of whack. Another problem n Texas is the privacy issue so sold comps are NOT public knowledge and for all practical purposes site like Zilloware virtually useless in this endeavor! I sometimes fight property taxes for clients and my strengths come from the fact that I have actual sold data and I have been inside many of the homes I use as comps. The County appraisers have rarely done so. We had a 3 year period in Travis county where the Chief Appraiser was extremely aggressive and hardly open to reason that made the whole thing incredibly contentious but he retired last year and hopefully the process will become more fair!
Bill--Good information for all homeowners! I have been recommending to all of my buyers to keep the copy of the appraisal handy as early in 2009 they will have an opportunity to file a challenge to the assessed amount. Many homes are appraising for significantly lower than the current tax value and it is important to have documentation from an outside source when meeting with the assessor regarding the value of the home.
Russell it certainly does sound like more of a challenge down in Texas. Hard to believe at this point in time there is no access to homes sold data. I can see where a good Realtor like yourself who knows the inventory well could be of great assistance to those home owners that are entitled to an adjustment.
Teri - One would think that an outside appraisal would be a good start in building a case for a tax adjustment. I am not sure what the success rate is in your area but here in my home town they will certainly listen to you if you make a good arguement for an adjustment.
Bill - - thanks for the LinkedIn note about your post. Taxees are done differently here in CA. People have been able to file for a temporary drop in their property taxed due to the changes in the market, and some communities have inplemented a change across the board. But they will be readjusted at the appropriate time. In some cases assessed values are way below market, and in others they are actually above. That changes once the home sells.
Jeff
Jeff it is interesting how assessed values work differently in many parts of the country. We see the same thing here in regards to assessed value being way over or way under current market value.
We are seeing a lot of reassessed value here...and I can't say its to save taxpayers money...tax office is floating around trying to make sure...those that claimed exemptions based on use...value...etc..etc...are true! We have extremely high taxes here...and at one point...we were the 3rd highest in the state of Florida...why I am not sure...but one thing....WE NEED SOME COMMERCE HERE!
Midori assessed value is all about taxes and revenue that a town needs to generate. The assessment and tax rate are just semantics when it comes to what a particular town or city needs for revenue. We have high taxes here in Massachusetts as well. Hence the name Taxachusetts!
Great informative post. I personally believe we are entering a time where assessed values may go below fair market values. Towns and municipalities over estimated the value of rising real estate to fund their budgets. Very poor planning. They do not want to let go of those dollars, and will resist reappraising the properties worth to keep money in the kitty. I am afraid this has occurred across the nation. Home owners need to fight for their rights now more than ever.
Thanks Jim. Your statement here are on the money of course. I am not sure how it works in Atlanta but here is Massachusetts the assessment as sure to come down as the re-assessments are done for this coming year. This is all of course semantics because all these town have a budget and need to bring in those dollars necessary to run their respective towns. The adjustments will be made by increasing the tax rate to off set the lower assessments.
In respect to home values people need to understand that the assessed value is almost always lagging behind what is happening in the Real Estate market. The assessed value placed on a home also can vary based on land size and things such as outbuildings, a pool ect. All these things can add to an assessment but may not have a corresponding value in terms of what a buyer would be willing to pay for the property.
:) LOL...sorry but thats very funny! The county is giving people x amount of days to provide evidence of land use and such!
Midori - The jokes on us. That is one of the reason people pay so close attention to their homes tax bill. The taxes on a home here are out of site. I pay close to $13,000 a year on the taxes for my home!
I have tried appealing the property taxes on my home since the assessed value was higher than what we bought it for...no luck since the assessed values were based off of 2006 comparable sales. Very informative for homeowners.
good info, and you are right assessed is rarely the same as actual , and now it is rarely the same on the downside (the assessed is probably too high)
Patricia this is a common theme you here all the time in regards to abatements. There a different rules for different states but it not uncommon at all to hear a denial of an abatement request based upon the time frame of when the assessed data was used.
James - I have never been able to find any ryme or reason to a homes assessed value. I have seen two similiar homes side by side built by the same builder and the home with the smaller square footage and lot size is assessed higher than the bigger home. Did the home owner in the smaller home file for an abatement at some point and get their value dropped? Who knows but in many circustances it causes you to pause and wonder.
This could be a whole new can of worms this year and next.
This is an excellent explanation of assessments and what an owner can do if the assessment is too high for the market! The trick now is to get a handle on the market value! I know several appraisers who are struggling with this every day! However, an appraisal may be very persuasive evidence of the true market value.
Susie it will only be a can of worms for the home owners who think their tax bills will be lower because of falling assessments. Of course lower taxes are does not roll of the tongue easily in Massachusetts.
Joan - Thanks for the compliments on my article. In most circumstances an appraisal would probably go further than a broker price opinion as they are certified and we are not. That would be a rant for another day though.
Hi Bill...You did a great job explaining the process in Massachusetts. Congratulations on the feature.
As we all know, things not only vary from state to state but from county to county. Fortunately I am in a more rural area where many property owners feel pretty comfortable questioning their assessments. That's not to say that many get changed.
Kate
Hi Bill - The same for RI. Good post lots of info. Good Point - "Things written in the Multiple Listing Service (MLS) like "What a bargain this home is priced X dollars below assessment." Most of the time the Realtor is making a very poor correlation between the assessed and market value." - never was a big fan of this advertising. Happy New Year
Thanks Kate. I know there is quite a variation of how this process works from state to state.
Lisa - This type of marketing has always been a pet peeve of mine because it is written like you are doing the buyer some kind of favor by placing the home way under market value. It really is a silly statement that does nothing for the seller.
Bill, as always, great timely and useful information. I know the whole assessment value is a big mystery to most folks and this puts a lot of that mystery aside and replaces it with valuable info !
Chris & Stephanie - Thanks. The whole assessment v.s market value correlation would make the top ten Real Estate myths list:)
In New Hampshire the assessments are all over the place and different from town to town. Which makes it very confusing for the public and even REALTORS!
Oh, I wish our tax values would go down they way home prices have! That would be a nice New Years present! LOL! It is great that you were able to articulate the difference between assessed value and market value. I think I will have to print out a copy of this article (maybe insert Nevada where your use Mass.)haha) and show it to clients and, more importantly, family members who insist I do not know what I am talking about!
Happy New year!
Fabulous work on the article, Bill. It helps pre-explain an objection to proper pricing, as well.
Bill - as one who has challenged my own and others assessments ove the years it's interesting to seee some of the differences in other areas as to the process.
Monika - It works much the same way here in Massachusetts as well. I am constantly amazed when I look at assessed values. There is no ryme or reason as to why some homes are assessed the way they are in realtion to other homes.
Terrie - If we could all get that lucky it would be great:)
Wendy - Thanks for the compliments on my article.
Barrie - I would have to agree with you. I have learned a few things already from some of the comments of others living in other areas around the country.
Bill, I really wonder how many people actually do not know this very fact. Good information.
Hi Bill,
Excellent info for consumers in Metro-west MA, or anywhere for that matter in your state. You are so right in your analysis that assessed value and market value should not be confused. We have a similar issue here also in SoCal.
Right now many existing owners are going through the appeal process to reduced their taxes too.
Bill- Here in Florida you can not use the assessed tax valuations for comps on market value. One has nothing to do with the other. Many people here have not even gone down to get their assessments reduced because of the fall in the market. This is sometimes difficult to get buyers to understand.
Danny - There are plenty believe me. I am constantly educating my clients as to how assessments work and the fact there is very little correlation to a homes market value.
Lynda - It will be interesting to see how the new evaluations look for this year. There will be a lot of complaints I am sure when people realize it will mean nothing for a tax break.
Katerina - I never even give them a 2nd thought when I am evaluating a property here in Massachusetts either. There are plenty of home buyers and sometimes Realtors too that don't realize there is a difference.
Bill -- THANK YOU for writing this post. Now that many home buyers are internet savvy, I see so many clients checking the tax assessors site to view the assessed value of the home to determine an offering price. As you said, "assessed values are nothing more than a yard stick for a municipality to collect an appropriate amount of taxes" -- Assessors cannot possibly keep up with a market that changes monthly -- and sometimes weekly.
Bill, You do a wonderful blog. I have done so many abatements on my own home and I am about to do another. Thank you for all the info. You are a terrific blogger. Best to you in '09
Kerry that is one of the biggest Real Estate mistakes there is. If I was writing a top ten list for the biggest Real Estate myths the assessed v.s market value arguement would be right up there.
Pat - Thanks a bunch. So I assume you have had some luck with the abatement process? Good luck with your abatement request.
Bill- Do Bob Bushway a favor: print this out and post it down in the Assessor's office at town hall. I think you're right that we'll be forever fighting the battle with consumers about market value v. assessed value. The killer is that once in a while you'll have a comp that actually did sell around assessed value and then the homeowner or buyer is convinced the correlation exists.
Thank you for another very useful post!
Kathleen - For the most part I think Hopkinton does a fairly decent job of getting the assessed value at least in the ball park of FMV. There are many other local towns that are way off. You are right that on occasion there will be a home that sells very close and people will try to draw conclusions from that. It is pretty easy to convince them otherwise though when you roll out a long list of sold properties that are either much higher of lower than the assessed value.
Heck we both know there are many who do fight the assessment and win. They get their value lowered and the rest of the neighborhood is scratching their head when they start to compare their home against that persons property.
You know people who have gotten their assessment lowered? Heck I tried to go in claiming, "Yeah, maybe I have 1.5 acres but with the wetlands and all..." Bob cut me off with, "Oh don't give me that wetlands argument, 50% of the town could claim the same thing. Scram." (Well, he was a bit more polite but not much.)
Cities need their tax money so they aren't lowering the assessed values too much here in Metro Detroit
Great information, Bill, for your local readers. We have prop 13 out here in California. I have a friend who called recently trying to understand why her home taxes went up when values are down. What she didn't realize is that she bought about 12 years ago, and her tax basis is still lower than market value! Municipalities, like everyone else, need their revenue!
Kathleen I am not saying it is a regular occurrence but I do know a few who have managed to get them lowered. Obviously you would need to present a real strong case. If everyone in town was at Bob's door step and he was lowering the assessments further the town would be in big trouble as they would not have the revenue needed to operate properly.
I think you would have a better case if you were being assessed higher than all the other like homes in the neighborhood.
Russ - I have not seen the latest assessments but I expect them to be lower but not by the same amount that the market values have actually dropped by. It will be interesting to see the adjustment although, I know if will not mean lower taxes as the tax rate will surely rise.
Carol the same thing happens sometimes here as well. Some of the homes that sold years ago will have lower assessments if they have not resold during the time that the market was booming.
Bill great information. Everyone like the ride up but not when it is coming down. The public tend to beat up the Assesor glad you clarified his position.
Jennifer - Thanks. I am sure there are many local assessors that are taking quite a beating:)
This is such an issue in so many areas. We have so many homes here assessed higher than they are worth today. Just like when gas went up in price recently, we saw that same spike in food - yet the gas prices are down and the food prices have stayed up... We have some catching up to do that's for sure!
Ours never match the market value...nothing more than ...'this is what the city is assessing your property for purposes of taxing your property'. During the boom it was thousands lower...then higher....and now it's ...well, ho hum. :)
Last year they doubled our exemption...from 40-80k and on and on by age...in the end I got a refund check for property taxes (the escrow account with my mortgage co)...never saw that before. :)
Bill.... what a very worthy feature. This is information that should be publically shown often because yes, so many are confused about the differences. Great job here...
We have been luck here that our values seem to hold steady
The assessed tax value is so different than the actual price a buyer is willing to pay. This is a good post to illustrate this difference.
Timely article, Bill. The same thing is happening in the Chicagoland market. Our team has been doing quite a bit of this trying to help our clients protest the assessed value.
Amber & Sally you both have confirmed the same message as far as your markets go...the assessed value and market value are rarely the same.
Roland - That is good to hear.
Morgan - That is a common theme for many areas around where I work. Most of the homes right now are assessed much higher than their value.
Kris - I would imagine that may be pretty time consuming?
Jeff - Thanks for the compliments on my article!
Bill -- South Carolina just (this past year) implemented a "point of sale" assessment -- ie. house is currently assessed at $375,000 and sells for $450,000 (not uncommon) the new assessed value is $450,000 - Which is a complete nightmare!! Even with the decline in the market if you wanted to downsize there is a good chance your tax bill on a smaller home will be more than the home you are moving from!
Jason - At least the assessments are uniform and not all over the place.
Bill - I know a fair amount of people who have tried to have their properties re-assessed, and taxes lowered. In California, that can be done by contacting the tax assessors office.
Wishing you and your family a happy, healthy and prosperous 2009!
This is a very well-written and timely article. For years...here in my area...tax values were usually significantly lower than market value. Buyers often asked me why they were paying more than tax value for the home. Now...it is common to see to listed prices significantly lower than tax values. Funny...buyers are not questioning why they are paying less than tax value. :-)
Hope you had a GREAT CHRISTMAS! Happy 2009!!! ~GBU~
Sharon - there are always people trying. Probably a lot more this year than in the past.
Elizabeth - Thanks a bunch. For the most part assessed value was in the ball park but right now there is a bigger disparity between assessed and market value.
thanks for the linked in link over! I was able to successfully argue this one with one of our counties last year, by showing comps and letting the assessor actually come to the property for walk through. This county chose to bring "water" properties up to par with a county closer to the metro area than we are, just about the time the market tanked. Has hurt many, many people at a bad time. We were able to reduce the new assessed value by over 30K, which helped just a bit on the taxes. In-town homes, no arguing, no reductions so far. They tell me 2010 will be the first time we may see some softening in the stance.
Vicky - Glad you were able to find my article via LinkedIn. It sounds like you did a pretty good job for your client getting their assessment down!
Excellent advice. I had my county RE taxes reduced. I also sent letters to all buyer who had purchased in the past 3 years and advised them to appeal their RE Tax.
Good reason to contact old clients.
.....and just as frustrating are states like Texas which assesses in arrears. Our market exploded last year, thus our taxes did this year after the market imploded. Well, I guess it will be something to look forward to next year....
thx.
Bill, I have suggested to every buyer that has purchased a home recently to closely check their tax bill this year. Thanks for the reminder to check my own.
I was listening to the news radio in my area today and they were saying the tax assessors office in MD is using values from 2005!! We are protected by a phase in system. It takes 3 years for the tax values to go up, but it also takes 3 years for them to come down to the new assessed values. Down is used loosely when it comes to taxes coming down!! Great article.
Lenn but how many of them will actually get any relief. Here in Mass it is pretty tough because it is all a function of needed revenue.
Tim - Sounds like your assessments follow the market pretty closely.
Kay - Your welcome:)
Audrey - Wow three years is quite a long time to wait. Things can be drastically different in that long a time frame!
Great info here Bill...very helpful explanation about assessments. I, fortunately, live in one of those less common states where tax value is assessed on land USE...which means people can invest in land and own it for pennies a year...Can I interest you??? ;-)
Around here, assessed value is even less reliable. We have had a law in effect since the late 70's that only allows the assessed value to increase by 2% each year even when we were seeing double digit increases in value. So, if people have owned for years, despite the way values have decreased, the assessed value may be way under value.
On the other hand, for those who bought in the last few years, they can be way over in their assessed value and need to ask to be reassessed.
This is important information for consumers.
Mara that sounds like a pretty good deal to me! We pay a lot of money in taxes to live in our homes here in Massachusetts. I just got my tax bill and it is going to be over $13,000 for the year.
Christine - It sounds like over time it works out better for you since Real Estate over time does appreciate.
I think this is true in most areas. Actually we have areas that assessed is higher and areas where it is lower.. kinda crazy!
I hope that your 2009 is just fantastic!
Happy New Year!
your friend in Charlottesville!
Bill, excellent discussion on this topic which I explain to sellers and buyers that look up the county tax roll values all the time and want to know how that varies from market value.
Thanks Gary. The assessed value and market value are often confused with buyers and sellers. Hopefully this article cleared some of the confusion.
What an awesome blog!! Unfortunately this is happening all over the U.S. Very informative!
Bill:
In a declining market assessed values exceed true value. This is a problem the local tax assessors face as people look to get a reduction. Although taxing is to based on equality, sometimes it is when it is being measured that makes a effect.
Richard
Bill, this is an excellent post on assessed home values! Very informative!
Tami & Jeremy - Thanks for the compliments.
Richard - Very true. In Massachusetts when we are in an environment where the assessments are dropping the tax rate will be on the rise.
Great information for the public since they often think the assessed value is the market value. FSBOs often make this mistake. Good job as usual.
Shirley - You are correct I have seen FSBOS make this mistake often especially those that have not consulted with a Realtor.
True this! I spent about an hour with a county appraiser on the phone so he could tell me how they do it. I still don't get it but was greatful he could spend the time :)~
This is one of the most misunderstood concepts in the business. I can't think of any client in years who hasn't at some point asked why assessed value is "so low". Here in Lancaster County the Assessments have run about 60-75% of market value. That's because our assessments only adjust every 7 years per statute. One of the ways a pro in the county guages the "crap factor" of a prop is how close the assessed value and asking prices are...
Bill,
At least in my area, This declining market is making appraised values higher than what a home is selling for.
There was a time that it was the opposite, as I am sure you know.
Marlene that sounds very strange why would appraisers be coming in at a higher value than what the home is selling for? Do you mean the assessed values are coming in higher?
Here in Florida the "comps" are usually for the last 2 years, so assessments are slow to fall. Also, since we have "Save Our Homes" caps, in cases where owners have been "saving" taxes for years, their taxes may still be going up while market values are going down.
Sharon as far as taxes on homes you guys have it pretty good down in Florida. Taxes are a killer here in Mass!
Hello Bill, this is a GREAT post about Tax Assessed Home value vs. fair market value. I spend a lot of time explaining this to Buyers, who usually start off very confused about the subject. Thanks for sharing such terrific info!!!
This is a great post. Assessed value can be very out of whack with current market value around here. If a home has been owned by one person for years and years, assessed value may be far under fair market, and it can be hard to make buyers understand that. Homes that have fallen into disrepair may be marketed for considerably less than assessed value. It can be really strange.
I have had buyers inform me of the assessed value and thinking this should be the FMV. The assessed value can be higher or lower than the FMV, but normally lower in our neck of the woods. In this deflating market, the number of owners filing for reduction has increased 700% over the past two years.
Vickie it is funny how if the assessment is low the buyer will try to use it as an arguement for why they made a low offer but you never hear anything when the assessment is high?
Brenda - I see the same thing all the time on homes that have not changed hands. It is easier for as assessor to come up with a value when they can see that the home has sold recently for X.
Chris - Assessed values are all over the place here in Massachusetts. Frankly I never even look at them other than to know what the taxes on the property will be.