Government wants my money

July 8, 2009 12:21 PM

I just bought a house, and I received a letter in the mail saying the city wants to re-evaluate the value of the house so they can tax me even more than they were. Now, as much as I want to pay the city more, what are their calculations based on?

When buying a house they list how much in taxes the owners pay. For me it was like "hey interesting, the evaluated price is way less than they're selling the house"

Little did I know that the city makes this as temporary as possible. So my question is, what is their calculations based on? Do they already know to charge me based on how much I bought the house for? Or maybe they'll charge me based on new schools or parks which were not present the last time they evaluated?

The reason I wonder, is because I wanted to redo the bathroom and clean up some other stuff, and I'm wondering how much this really has to do with anything. In fact, I'm not sure why I should pay more taxes just because I might have a cleaner house than someone else.

I'm in Montreal Quebec Canada

posted by Napierzaza to home & garden (10 comments total)

How the City of Montreal determines the value of your property for tax purposes. Apparently the appraises has some latitude in how he determines it. In other municipalities they usually mandate only one of these methods.
posted by GuyZero at 12:30 PM on July 8

I'm in Colorado in the US, so I don't know if the way my local property evaluations are significantly different than yours...

A little over a year ago we had this re-evaluation done on our house (after several years of being valued nearly $20K less than what we bought it for), and they based it on same-neighborhood home sales for houses with equivalent square footage, room counts, lot size, etc. The problem we had with this was these sales prices they based it on were out of whack - basically a recent thing happening in our neighborhood are houses that should be selling at less-than-listed amount due to the housing slump were selling at or above the listed amount due thousands of dollars in seller-to-buyer kickbacks. The buyer buys the house for whatever is asked or more...and once they close, the seller gives back thousands in "cash" to the buyer. We have a Realtor that specializes in our neighborhood, and each quarter she sends out a list of all home sales detailing these things - list price, days on market, sale price, kickbacks, etc. It's very handy to track the trends so we hold on to them.

Anyway, we tried to appeal this with the county, and they basically denied our argument and said the new tax evaluation stands. So you may have a similar appeals process that you can go through. Also, the assessor didn't look inside the house at all. They basically only looked at the local comp-sales and the "assumed" improvements on the internal of the house. I believe they did drive by, though, to view the exterior to see how the siding/paint and yard condition was based on info they listed in the report.

Vindication eventually came my way, even though they denied my appeal...they re-evaluated our neighborhood again this year, and they dropped our property value to pretty much the exact amount I tried to appeal it was worth a year ago, and they cited the housing slump and economy as the main factors, and we are now valued at what we actually paid for the house eight years ago, which I think is fair at this point.
posted by JibberJabber at 12:41 PM on July 8

In my jurisdiction, a sale is a de facto reason to reevaluate. Specifically, they have a pretty good gauge of what the house is worth -- the selling price. Ostensibly, a buyer and seller just went through an arm's length process of evaluating all the possible influences on value, et violá.

This, however, varies greatly by jurisdiction.
posted by GPF at 12:46 PM on July 8

I'm not sure why I should pay more taxes just because I might have a cleaner house than someone else.

Gov'ts also do this with property taxes on cars. Why should I pay more for having a nicer-looking car?

FWIW, I agree that this is totally bogus and counter-productive.
posted by @troy at 12:49 PM on July 8

Congratulations on becoming a homeowner. Your property tax bill reflects two factors:

a) the assessed value of your house, which is theoretically equal to its market value, and

b) the total property tax rate ("millage" or "mil rate") charged by however many jursidictions and/or districts include your home within their service area. Sometimes there are different tax rates for different types of land uses (residential, agriculture, commercial, etc.) Each jurisdiction establishes its own millage based on numerous factors, including the total assessed value of all properties within the service area, the total capital and operating budget requirements, applicable law limiting annual increases, monies from other sources, etc.

In your case, you just established the market value by paying whatever you did for the property. If an inspection takes place, it will likely be to confirm simple information that helps determine value (e.g., number of bedrooms, bathrooms, square feet, etc.) and will then help them use the sales price data to value other similar properties nearby. The inspectors are used to looking past the flotsam and jetsam of daily life; as a former assessor, I can assure you that "having a cleaner house" makes no impact at all and that it's not like staging a house for sale on the open market.

If you "redo" the bathroom, you might create some additional market value that will be reflected in the assessment, but the system recognizes that periodic renovations and maintenance activities (e.g., a new roof) are just part of ordinary homeownership. In many jurisdictions, receiving a building permit creates a tickler in the assessing department to go check out the property again, but often they only check if the project is over some significant construction cost. Otherwise, you're not creating a huge taxable event and it will probably only be reflected in a general notation of the condition of your property.

If you're concerned about the tax implications of new public amenities like parks or schools, you should get involved with the pertinent decision-making processes. People always raise this issue and you can usually find out if there are any implications for your tax rate and, by extension, for your tax bill.

By the way, I can't speak to Montreal on this factor, but in many jurisdictions operate under limitations to how much they can raise their tax rates and/or revenues collected via property taxes. In some places, tax rates can actually fall when the total assessed value rises, either through appreciation or new growth.
posted by carmicha at 12:52 PM on July 8

So my question is, what is their calculations based on?

On re-reading the Montreal web page, the last two methods apply only to commercial property as redicental homes don't have a depreciated value and they don't generate income.

So it's based on market value assessment i.e. the sale price of comparable homes.

Also, renovations and upkeep do not have any direct effect on your assessed value:

Changes to your property

Some renovations or improvements will not necessarily increase the value of your property by an amount equal to their cost. For instance, spending $10,000 to renovate your basement will not automatically result in a $10,000 increase in the value of your property. Regular maintenance work such as replacing the roof, repaving the driveway, applying a few coats of paint or changing a carpet does not increase the value of your property.

For those who can't click the link above.
posted by GuyZero at 1:03 PM on July 8

Gov'ts also do this with property taxes on cars. Why should I pay more for having a nicer-looking car?

What? Maybe this is a Canadian thing, but I have no idea what you're talking about, and I have a hard time believing Canadian cars are taxed based on aesthetics. As in Montreal, most American cities do not factor minor renovations into the assessment and instead base it on the sale prices of surrounding, similar homes. Generally, here they do not even actually look at your house, so whether or not it's "clean" or "pretty" has no bearing on the assessment.
posted by desjardins at 3:23 PM on July 8

Is this letter definitely from the city? I'm in California, and we got a similar letter recently. It looked like official governmental stuff, until a closer read revealed that it was from a company fishing for business by offering to do home appraisals.
posted by vickyverky at 4:13 PM on July 8

That crazy CA junk mail crap doesn't happen in Canada. Mortgages and sales don't go on the public record the same way. Having just moved to the US with a credit history that contains exactly one thing - my mortgage - I know exactly what triggered all these crazy offers for assessments and refinancing in California. It's a California thing.
posted by GuyZero at 4:26 PM on July 8

Thanks for the information. Strange that they probably won't need to see inside. They make it sound so important that I must call before a certain date etc I thought that this was a major comb-through moment. Well, if they do have such latitude on the price, I guess I should try and be really nice. Not to mention I won't be needing to release cockroaches to devalue it or something.
posted by Napierzaza at 9:38 PM on July 8