BiggerPockets

I am not understanding what you are asking.

Tax assesments have nothing to do with market value.

Are you in the city limits or just the county??You can have an assessment go down but the mill rate for the city or county budget go up thereby increasing your property tax bill.

If the assessment is 95,000 the taxes shouldn't be that big.Why not project out the worst case scenario for your projected hold time and base your offer price off of that.

If you want to dispute taxes there are organizations that do this but since your property is so small you might want to take it on yourself.

http://www.aptcnet.com/articles.html

I wouldn't operate that way. It is probably illegal and definitely unethical.

How much are you planning to pay outside of closing? $10,000 would only save you $378.90 a year. Really not worth it for the risk.

Maybe you can get the zoning converted to residential, or some kind of tax break?

In my county anything with 3 units or more is considered commercial. Plus, its within one block of the square so that automatically zones it as commercial regardless if its a sfh or truly commercial. I just got it bought for 93200 so it's mine now assuming it appraises! And I'm paying 1/3 cash and financing the rest.

I should clarify as I was replyig from an iPhone, it doesn't matter if you live in town or in the country as far as property taxes go, it is all paid to the county. Thanks for the feedback, I already knew the answer, I was just hoping for a loophole.

Originally posted by John Holme

In our area, the assessors like to go into the property during the smoke cert inspection and give it their own price, they don't care what you pay for it. $18.2 mill rate

Paid $89k assessed at 128k
Paid 27k assessed at 126k,
Paid 30, assessed 123k.

This is exactly why I laugh when people say an assessment is an estimate of worth. I bought a property that was assessed at $270,000 for $135,000, and I'm hoping to call up and ask them to reassess. They probably won't budge, I might get assessed down to $250,000 or something though.

Originally posted by Linda R.

Max,
I am friends with the lady who checks the houses and she has lowered every single place I have bought.

This just gets worse and worse. I'd be careful what I post on a public form, referencing knowing the lady somewhat implying that to be why she lowered your taxes isnt something id publicly say, ever. I'm sure you'll go back and say thats not why she lowered them, but if that was the case, you wouldnt need to reference knowing her. I believe that would be illegal, and possibly risking her job. theres almost no way your lender would be ok with this situation, you'd probablly scare the seller into thinking your trying to pull some scam, which in sense you are, and risk him backing out. Why would a seller be willing to aid in this scam? he has no need to, Again, were talking about maybe $400 a year, $35 a month, to risk jail time? no thanks.!

I've decided to make it easier for anyone reading this thread to understand that I am simply asking a question to see if they are any loopholes. I acknowledge more than once that there probably are not any but I certainly don't see the harm in asking a question. The majority of us come here to learn and to learn it is important to ask questions.

Linda

I am sure the answer is no but I have to ask.

I guess I already know the answer and the seller would have to be willing to sign a DOV which would not be accurate and that is certainly a legal issue but I am hoping for a loophole.

My question is if I can legally pay some money to the seller outside of closing so the reported sale price that goes to the court house is less.

Thanks for the feedback, I already knew the answer, I was just hoping for a loophole.

I am friends with the lady who checks the houses and she has lowered every single place I have bought. None of them have been this nice though.
I should've added to this post that they were all purchased for less than what they were assessed at and that, plus the condition they were in, is what contributed to my assessment being lowered.

Financeexaminer, with the exception of your sarcastic remark, I appreciate the advice to break out any personal property! :-) Unfortunately, there is not enough to make a significant difference in the sale price. I do depriciate appliances, etc, separately.

I understand federal law trumps city, county or state law but what does that have to do with zoning and property taxes? On second thought, you are giving me something to think about though, if the feds say 5 or more units is commercial and anything less is residential, that may give me some ammo to go the appeals board. It won't work on this property but I do own another triplex that is zoned commercial and two sfd's that are also zoned commercial based on their location. At the same time, that also makes it easier if I wanted to rent out the sfd's as commercial properties since they are already zoned that way.

The thing that gave me pause on this whole deal is how much taxes were and the potential for the county to raise my assessment based on the purchase price. The county board of supervisors raised the levy last year and my personal property taxes went up over $600, they was no real explanation as to why they did it, we are not operating at a deficit in my county. That to me is criminal!

Linda

PS There are all sorts of corporate loopholes that people use to shelter themselves from taxes, one that comes to mind, I will admit I do not understand it completely at this point in time, is S corps. Anyway....

I have an apartment in Council Bluffs and found out there is a loophole in the Iowa law that allows you to declare the mulifamily property as either a condo or co-op. I'd suggest going co-op as the building codes are less strict than condo. I did this with my apartment and had it recognized as residential by the county and dropped the property tax in half. The reduced tax paid for the leagal expense in less than a year and dramatically increased the profit. Branstad has introduced a bill that will drop commercial property taxes over 5-6 yrs but only by 40%. Going co-op drops it by 55%.

Geeez! Think about your question. Can you pay a seller outside of closing and show a lower sale price? You posted that you have experience, that you have done rehabs and sold properties (obviosuly you had to buy them too). Did you ever hear any of those aquaintances you mentioned(attorneys) say that you don't need to show the true sale price in a closing? Don't you think that would kinda be a big deal? Think of all the other advantages to such a closing, title coverage would be cheaper, banks could make 110% loans, transfer taxes (if any) would be less, the seller would have less income taxes to pay and the buyer would have less to basis when the property was sold...the list goes on.

Have you ever heard of the term FRAUD?

There are different categories, tax fraud, lender fraud, settlement fraud.....seems your thought of a loophole could touch on all of these. Pretty elementary for someone with the experience claimed. So yes, my one sentence above was simply to get you thinking.

But noooo, you feel compelled to point out a slight bit of sarcasim, which then leads me to spelling it out for you. So, IMO, if someone is experienced and asks a question like that it's pretty plain how they try to conduct their business, look for "loopholes" so we can lie. OTH, it's not a bad question for a newbie, and to that I would suggest if you are going to be in real estate, become familiar with the surrounding issues (legal contract issues, lending issues, taxation, insurance and RE commissions) that are based on any real estate settlement statement (A HUD-1, for residential is the required form and is a federal document, commercial can be on other settlement statements). Ever hear of the Real Estate Settlement Proceedures Act? Just one of those little federal laws that gets in the way of RE investors doing what ever they feel like!

At least you saved your reputation with the attorneys you know by asking that question here instead of asking them.

Yes, my comment was to get you to think. Yes, showing what the use of the property is rather than what it could be used for will determine the value of any property in any state at a point in time. If Iowa uses market value of RE as a basis for taxation, you might use that evaluation. I have never heard of any taxing authority taxing a property as a retail shop if it was a SFD, unless the SFD (building) was in fact used as a retail space. There are commercial buildings, like an old neighborhood grocery store that could currently be used for housing, but that would still be a commercial building until the property was reassessed for its current use.

And, if you do not state in your purchase contracts the value of personal property you must be using the fair market value of personal property (PP). If you were to be audited, can you show the FMV of the PP? Did you get a used appliance store to give you a value? Or, did you pull it out of thin air? Had the values been stated in the contract you would have a stated basis that could be defended. So, regardless of how insignificant PP might appear to be in your RE acquisitions, I suggest you list it to form your tax basis. Good Luck!