Will My Taxes Go Up? What Will They Be? What is My Assessment?
This week we will be exploring the intricate and ever evolving multi-verse of property taxation. I have included a brief 12 minute video tutorial at the end (see below), in which I will walk you through the process of calculating property taxes for yourself, the method used to do it, and the websites needed to access the data. I will also show you how to translate that oft confusing assessment into the full market value per the town.
Many buyers look at the “assmt” category (right below “tax”) on the MLS sheet and are very bewildered.
No, the town doesn’t think your home is worth $3,750. You need to find the multiplier, or Residential Assessment Ratio (RAR), which gets applied to the assessment in order to decipher what the town actually thinks your home is worth. I will show you how to do that in this video.
Conversely, I will show you how to translate property value into assessments using the RAR, so you can calculate the taxes for any valuation of a given property. This should be particularly handy in figuring out what a current tax bill will look like in the event of an increase in assessment.
Note: if a property is located in a town that is 100% valuation, the assessment will be identical to the property value. Tax rates are per $1000 of assessed value, so in order to calculate taxes for future valuations on properties in these municipalities, you simply divide the valuation in question by 1000 to arrive at your assessment multiplier. Sound confusing? Now you understand why I made the accompanying video.
For those buyers out there considering purchasing a home that is very under-assessed (the town has it valued at substantially less than the asking price), it’s necessary to point out that you are only a candidate for your taxes to increase under the following circumstances:
1. The property is in a 100% equalization municipality that regularly updates their assessment.
2. The property has had a substantial amount of work done (e.g., a “flip” property) within the past year (if there are a lot of outstanding permits, taxes will go up once they close and the CO’s are recorded on the property card).
3. The property is in a municipality that is undergoing a revaluation.
If your purchase does not meet any of this criteria, then it’s not likely that your assessment will go up to your full purchase value. If it does, then you have legal grounds to petition this increase. The courts in our area generally uphold a “fair neighbor” methodology and will rule in favor of the homeowner if the municipality has raised your assessment, but not that of other properties in your town, exclusively by virtue of your recent purchase. Having said this, if the municipality IS raising the assessment of those properties around you (which is likely in the 100% municipalities that maintain their assessments on a regular basis), then they may raise your assessment to your full purchase value once your deed crosses the assessor’s desk. However, is it likely that your assessment will go up to your purchase price? Maybe not.
Even in 100% equalization municipalities, the assessor will not solely go by the new purchase price, but rather has to justify any assessment increase with a comparative market analysis and compare your property to at least a couple of others. This can serve to temper the assessment increase somewhat, depending upon the comps and whether or not there are other recent similar sales. I’ve found it to be the case that, in 100% equalization towns, the market has increased faster than they can adjust assessments, even though they do so on a annual or bi-annual basis. As a result, recently sold properties tend to be higher in value than the assessments for surrounding comparable properties that have not been recently sold. Since market inventory is notoriously low, the assessor may be limited to using properties that have not recently sold and factoring those into your valuation.
So what I’ve seen anecdotally is that, yes, if you are buying an under-assessed property in a 100% equalization municipality, your assessment will go up. However, if you’ve purchased substantially higher than the current assessed values of your neighbors, then it won’t likely go up to reflect the full price that you’ve paid. It’s worth noting though that, because your home IS a comp for your neighbors, your home could have the opposite effect of causing their assessments to elevate somewhat as well.
I’d like to take a moment and list the 100% equalization towns in Westchester, Putnam and Rockland counties so that you are aware. These towns, which perform regular assessments, are as follows:
- Greenburgh (including villages of Ardsley, Dobbs Ferry, Elmsford, Hastings-on-Hudson, Irvington, Tarrytown)
- Mamaroneck (Including Village of Mamaroneck and Hamlet of Larchmont)
- North Salem
- Putnam Valley
Without further ado, here is the tutorial! You’ll see that I use Excel for calculations, if you’re comfortable with Excel, great, if not, don’t stress. As long as you have a conceptual and mathematical understanding of what I’m doing, you can use a piece of paper and a calculator.