Medicare requirements on sale of a house

June 28, 2016 7:51 AM

I am negotiating to buy the former home of a person who has recently gone into assisted living on a permanent basis. The price is set at the tax-assessed value, which apparently is what Medicare requires for such a sale. Is this a hard and fast rule (no use trying to negotiate) or would negotiating a lower price (say, in anticipation of repairs on this old home) be possible?
posted by mmiddle to Law & Government (8 answers total)

First, I'm wondering if you mean Medicaid, not Medicare.

Second, in my area, and everywhere I've lived, the tax assessments have little relation to market value. Mostly they are lower, so forcing a sale at that price would rip off the owner (and Medicare/Medicaid client).

So the whole thing sounds odd to me.
posted by SemiSalt at 7:57 AM on June 28, 2016 [1 favorite]

Response by poster: Thanks - good chance it's Medicaid, but my agent said "Medicare."
posted by mmiddle at 7:59 AM on June 28, 2016

I am also confused. Assessed value will in almost all situations be far below market rate for the property, so if the seller is offering you a home at assessed value, you shouldn't negotiate, you should buy it immediately!

If you are buying a home in the location in your profile, your county has a really great online property database (search [city] assessor of property), which includes both "Appraisal Value" and "Assessed Value" -- Assessed value is what your property tax is based on, and is generally much lower than the appraised value, which is based on the current market, comparable properties, etc. Just plugging in random addresses into that database shows properties where the assessed values is 1/4 of the appraised value.

You can also look this property up in the aforementioned database and make sure that your agent isn't saying "assessed" when they mean "appraised"? (If so, I would consider getting a new agent :) )
posted by misterbrandt at 8:16 AM on June 28, 2016 [3 favorites]

I would suggest that you ignore the assessed value altogether and pay attention to the appraised value only if you are getting a mortgage and instead focus on what you think the property is worth. Use your own value based on comps, what work has to be done, location, property tax payments, etc. I assume the goal is to buy a house you like at a value you think is fair. Come to a top price you are willing to pay and negotiate based on that. Be willing to walk away at a price that is above your top price.

Assessed value can be important when the property taxes are high. In my home county, Westchester NY, property taxes for a home can range from $1,000/month to $4,000/month depending on the house and the school district.
posted by AugustWest at 8:38 AM on June 28, 2016 [1 favorite]

Response by poster: More thanks - just for the record, it's the assessed value, and I *am* going to buy it immediately. The assessment plunged from $280k to $191k a year or so ago, maybe the point at which owner was assigned a guardian. County tax records (this location not TN) cite only assessed value, not the appraised value, and it looks like if you offer some other $figure, you will need to offer a private appraisal. All the more reason to move quickly, and not quibble.
posted by mmiddle at 8:47 AM on June 28, 2016

It's hard to say exactly what's going on here. This is likely to be a Medicaid requirement rather than a Medicare one (many elderly people have both and a lot of people confuse them, but Medicare does not pay for long-term care and Medicaid does). Since you become eligible for Medicaid after you've spent down your assets to a designated low amount, they have a lot of interest in making sure that the assets are not artificially lowered--i.e, no one is trying to sell their house at 1/4 of its actual value to a grandchild or otherwise shelter funds.

Without knowing more about exactly how the TN Medicaid program or the tax assessment system work (there's a lot of local variability in both) I would say that it's likely that you'll need to provide substantial justification for offering a lower price and will likely need at least one and possibly more than one independent appraisal in order to satisfy the Medicaid requirements. If there's any competing interest I think it's likely that the family will go with the offer that is least likely to cause them headaches with the insurance people, since Medicaid can come after you and claw back benefits that it determines you were not entitled to.

The assessment thing is confusing people because in many locations the tax assessed value has essentially zero relationship to the actual market value of the house. For example, a house in my neighborhood just sold. Per the public records, it has a taxable value of $28,000. The purchase price was over $500K. It sounds like maybe in your area there is less of a disconnect going on.
posted by The Elusive Architeuthis at 9:23 AM on June 28, 2016

Yeah, something is not right. Neither Medicare nor Medicaid will pay for assisted living, but Medicaid does pay for nursing home care. But the homestead is not countable, so the standard recommendation is not to sell the home at all, even if it means leaving it vacant for a time.

But when it comes down to it, each state has its own rules.

It is also not true that assessed value is "almost always far below actual value." Sometimes it is, sometimes it isn't.
posted by megatherium at 2:56 PM on June 28, 2016

Since they will accept a private assessment, it sounds like the rule is there to prevent elderly people from being totally ripped off. In other words the offer has meet an objective standard of value - either the assessed value or an official outside assessment. I don't know who exactly is making this requirement but it sounds like you would need to be confident that the house would assess at a lower price before you could get away with making a lower offer.

Are you buying the house "as-is"? If not, there is plenty of room to bring down the real cost of you by negotiating for items which the seller needs to either repair or (preferably) give you an allowance to repair on your own.
posted by metahawk at 4:38 PM on June 28, 2016