Property Tax Question - Tax Value vs. Purchase Price

8 Replies

Does anyone know if the property tax rate is showing a higher rate than the amount of purchase if it should be reduced to the actual purchase price?   I haven't been able to get a good answer from the county and was hoping someone could give me a quick answer.

Depends on the local taxing authority....not usually. Most property values are done by comp sales in the area.

I can speak for Texas, traditional sales from MLS will typically get reduced to sales price without much resistance. Foreclosures, corporate sales, or not on MLS sales hit greater resistance.

Tax rates are usually based on a average for the area covered and have nothing to do with actual purchase/sale price of a individual property. It depends on your area.

If a seller gives a property away or a buyer over pays it will have little impact on tax assessment in many/most cases.

I haven't seen property tax rates in Maine lowered due to the purchase price of the property. As others have said, the municipality wants to have a contemporaneous estimate of all properties. This gives the perception of fairness and allows them to adjust the mil rate to raise or (rarely) lower the taxes.

Typically the only time you can get an adjustment to your property taxes is immediately after the re-evaluation when there may be a period of time given for property owners to dispute the new value.

Thank you!  I have a few owners that are really frustrated by market rates higher than purchase prices so I wanted to verify this was the case since I am not a CPA or tax attorney. 

With the market being as strong as it is getting taxes reduced has been next to impossible even with most of our MF portfolios seeing a 20% plus increase in Minnesota.  

You can appeal your assessed amount during a certain time period every year.  There are no guarantees that you will be successful which is why you aren't getting a good answer from the county.  As mentioned above, their values are estimates based on properties in the area.  If your assessment is too high, your neighbors and the entire area is also likely too high and the assessor probably already knows this.

Many cities and counties in MN have pushed through tax increases and imagine all the calls people would get if their value dropped and their taxes increase...  Some people think tax value holds weight but not many of us will price a property based on tax value.

Hi @Michael Tempel

Why do you care if the assessed value is more or less? That affects you only if the tax is too high and your numbers won't work. I look at cashflow and if numbers are good after deducting all expenses including taxes, usually I don't care about assessed value.

However, the assessed value in some markets gives a clue on the neighborhood. If the assessed value is incredibly lower than what you are paying for the property, then it's a red flag.

In Northern Virginia, I sensed that assessed values are usually 10%-20% less that market value. In other markets such as Indianapolis, sometimes you can buy below assessed value.

Pretty sure he is asking because he wants to get his tax assessed value dropped in hopes of paying less tax.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.