Why do property taxes vary so much on this street?

March 26, 2008 5:35 PM

How Does The California Property Tax System Work?

I was looking through Zillow a bit.. and I was curious about a neighborhood where there are a line of houses, all built in 2006. However, if you look at the property tax information that Zillow provides, some houses seem to have tax assessments that are *significantly* less than their neighbors. This can't be a result of Prop13, can it? The houses are similarly priced and bought within a year or two of each other (2006 or 2007...). So am I missing something? How are property tax assessments actually done? Did someone pay-off an assessor to undervalue certain houses? Is Zillow posting bad data? Is it because some of the houses may be "bank owned" now -- and the bank has worked out some deal with the state to lower the property taxes on the distressed houses? Any other guesses?

posted by mhh5 to law & government (7 comments total)

There's a couple unspoken premises here, that I suspect account for the appearance of disrepancy.

Premise 1: that all of those houses should have pretty similar values. Do they have the same number of bedrooms and bathrooms? Same floorplans? Same views? Same number of garage spaces or parking space? Same "extras" like marble countertops or spa tubs? Have none of the owners put on additions? Do they all still have their original owners, or were some flipped for a higher price (new tax basis)?

And what was the peak and low of average home sale prices in that area while those houses were selling? Prices in much of CA were still skyrocketing in 2006 and early 2007, then began tumbling throughout latter half of '07. Lots of people are unhappy lately that their 2 year old home has a twin down the street selling or $100k less.

Premise 2: that Zillow data is reliable. Pick any home that you know the exact sale price, assessment, and tax bill for. Compare to Zillow's info. They gather from a lot of disparate sources, and 'zestimate' the rest. Oftentimes at least one datapoint -- if not all of it-- is fubar.

Californians also can appeal their property assessment annually. But it's a pain, so many don't bother and downright avoided while the market was on the rise, since that would have been counterproductive. Until, that is, they're looking at a tax assessment that's nowhere near what they could sell for. Suddenly it's well worth the bother. This alone could account for the variability.

More info here or at the applicable county's website.
posted by nakedcodemonkey at 7:13 PM on March 26

Thanks, NCM... I'm pretty sure there's been some property tax re-assessment now. I drove by the neighborhood, and the houses look virtually identical, but one is now bank-owned and up for sale -- so I assume there has been some kind of foreclosure-like event.. and perhaps there's some damage or something that isn't apparent that the bank had reappraised... But it seems fishy that the tax assessment for the *land* would also be halved..? (~$400K for the neighbor's land, ~$200K for the REO property's land) If the REO house is damaged, I could see it's assessed value go down by 50% compared to its neighbor, but the land shouldn't go down at the same rate, should it?
posted by mhh5 at 9:41 PM on March 26

Sometimes it seems that they assume land/house value is divided 50/50 and then just adjust both based on total cost. Also, if it's in an area where prices have fallen, land prices would presumably have plunged too.
posted by alexei at 3:07 AM on March 27

The available rationales for lowering the assessment can be pretty quirky. See for instance today's article about Larry Ellison's estate. It's not all that surprising that other knowledgeable, well-funded owners (such as a lender, in the case of the REO property) would similarly be able to use the system to best advantage.
posted by nakedcodemonkey at 10:03 AM on March 27

I drove by the neighborhood, and the houses look virtually identical,

By the way, that's not a reliable way to determine how similar they are in value. Especially in this age of cookie-cutter design of housing developments.

If you really want to get to the bottom of this question, just do another drive-by. This time talk to one or two of the homeowners hanging out on their front lawns. Neighbors know all, and so many are delighted for the opportunity to vent. Anytime I see a For Sale sign that piques curiosity, I chat up the nearest neighbor in eyeshot. They inevitably give an earful: which houses have sold recently and what the approx asking prices were, which houses have the 'good' floorplan, how long this sign has been out, their opinion of the property's actual worth, etc. Ask your question, explain briefly why you're curious, and you'll get almost certainly get the answer.
posted by nakedcodemonkey at 10:15 AM on March 27

This current article from Monterey gives you some concrete numbers to gauge the effect of re-assessment. Average $50k cut per home last year, likely to be average $200k cut per home this year.
posted by nakedcodemonkey at 6:47 PM on March 27

good stuff, NCM! yah. this housing market is nuts... and I guess it makes sense that bank-owned homes would try to get their property taxes re-assessed to be as low as possible. Who pays the property taxes if the lendee who walks away from a house didn't? Does the bank have to foot that bill? Does it get passed on to the new owners..?
posted by mhh5 at 12:20 AM on March 28