All Forum Posts by: Richard Sanderson

Local assessors are a valuable resource that is overlooked by many real estate investors. Perhaps it goes back to the old school belief that the assessor was the bad guy and going to find out too much. Well, today the local assessor is the least of your worries and big data has been here in the form of real estate information for a long time. The local assessor makes it his or her job to know about ALL valid sales of real estate. Meaning sales that don't always involve brokers and MLS, and know of land contracts, etc. They will also share what trends they see in the local real estate market. Most assessors work at valuing real estate for eight hours or more each day, all year. Sound like someone you should know?

In an ideal world you'd have time to look through a list of comparable sales that are very similar to the one you are looking at buying, or what you expect it to look like once you are done and work backwards by subtracting your improvement costs, desired profit, contingencies, etc. BUT who lives in that world! Certainly not you or I. The expensive route would be to hire an appraiser each time, but that's probably not economically feasible (as appraisers like to say). What I recommend it that you make close friends of at least three local real estate appraisers and take the time to peruse listings and sales when you have the chance. Download or access them through a mobile device and read them as you can (but be selective). You'll be a well-informed valuation specialist (not appraiser, but well-informed novice), especially about your local market, in no time (give it 30 days and reassess your progress). 

If you plan to remove the existing building and build a new home you’ll want to talk to your local assessor about how this will affect the current assessment and future assessments.

As background before heading down to city hall here are some things to keep in mind:

Timing for typical real estate assessments -

Assessments are always as of a specific assessment date. The local assessor considers the value of all the taxable properties in the jurisdiction (usually the city or county) as of this “effective date” of value. What happens to the property after that date may or may not affect the assessed value until the next assessment date.

Timing for demolished structures -

For example, if the existing building has an assessment date of January 1, 2016, and you demolish it on August 15, 2016, the local assessor may not reassess the value until January 1, 2017. So consider this if you want to use the existing building for storage or a construction staging area.

Don’t rush to demolish it thinking you will be saving tax dollars until you verify that with the local assessor.

Timing for new construction fully completed by assessment day -

Likewise, as you are building the new structure, the local assessor will estimate value for assessment purposes each assessment date. Continuing our above example, if you demolished the existing building in August and had a new home completed by January 2017, it would have a full assessment reflecting land and the new building.

Timing for partially completed construction for assessment day -

If, however, the new home was still under construction, the assessor would estimate its percentage of completion and the January 1, 2017, assessment would reflect the land and a partial completed building.

Supplemental assessment of partially completed construction -

What may also complicate things (you knew this was coming) is when the local assessor makes supplemental assessments. A supplemental assessment allows the local assessor to reassess completed construction and add it as a “supplement” to the original assessment roll to reflect a completed building when it was only partially complete on the last assessment date.

The supplemental assessment will be prorated so that the assessment for the completed building is only for the period of time when it’s fully completed and the end of the regular assessment year.

Continuing our example, if the new home was only partially completed on January 1, 2017, say 50% complete, the assessment for 2017 would reflect the land and a 50% partially completed building. Let’s say that you then complete the construction on June 30, 2017, and a certificate of occupancy is issued by the local building department that day. The January 1, 2017, assessment that reflects land and a 50% partially complete home would then get a supplemental assessment that reflects that it being complete and ready for occupancy from July 1, 2017, through December 31, 2017.

Valuation methods considered for new construction –

For new residential construction the local assessor can consider the cost approach to value and the sales comparison approach. The cost approach is the closest to what a contractor could build and sell the property for, including a profit.

Assessors use cost services that include local labor and construction materials costs. But the assessor won’t discount this approach because you performed some of the labor yourself (unless the quality of the workmanship is really bad). The assessor is estimating the replacement cost of a typical home, not your exact home.

The assessor may also consider the sales comparison approach, if there are sufficient sales of new homes that are similar to the one you are building. For partially completed construction the local assessor will likely rely on the cost approach and be somewhat conservative. After all, what is the market value (or defined value for your state for assessment purposes) of a partially completed building?

Go talk to the source -

Talk to your local assessor. He or she can answer specific questions about the valuation and taxation of new residential construction in your community. One of the difficulties with real estate assessments is that assessment policies and practices vary by location.

Some local assessors perform supplemental assessments while others do not. Some may have special abatements or exemptions for owner-occupied homes or certain energy saving features like solar panels. Go ask.

As a former local real estate assessor, I can tell you that data is more reliable the closer you get to the primary source. For example, the local assessor or tax collection records are much more timely and  accurate, if they are available and low-cost or free, than information from data compilation and reporting services.  Some real estate reporting services only collect assessment and tax records one a year, while others collect them quarterly or monthly.

Dante: By leads I assume you mean homes that have been foreclosed or our distressed sales?  All local real estate assessors are required to keep an inventory of the ownership of all real estate.  They track whenever a property is sold or when a document is recorded that affects the real estate (like foreclosure proceedings).  But one problem can be that some are up to 30 days behind what is being recorded at the municipal record office on any given day.  As a former local assessor I think that the local assessor is one of your best contacts for real estate investing.  They spend 8 hours or more each day studying the local market and have a rich database of information. 

I agree with @Rick S. says about contacting your local assessor. Many do have a means of keeping the owner name from showing on their public records, but at the same time getting necessary mailing (assessment notices and tax bills) to the owner. Changing the mailing address to a P O Box won't change the property location address or the address shown on the deed of transfer when the owner bought the property (as is often referenced in the public records on the assessment file). Keep in mind too that there in NO City or County Record Czar. The local assessor controls many that are on municipal websites, but the County Register of Deeds, Planning and Zoning Officer, Voter Registration Office, etc., often each have their own databases. 

In Ohio, what are commonly known as local assessors elsewhere, are known as county auditors. The County Auditor's Association of Ohio has a directory of auditors (assessors) for each county in Ohio. I've been in property tax assessment administration for over 35 years and have NOT found a nationwide directory for assessors that is reliable (there are over 8,000 jurisdictions). I think your best bet is a state directory from a state agency (department of revenue or taxation) or state-level assessor association.

@Jeff Copeland is most likely correct with the translation of the abbreviations. My only addition is to say that not all assessors have brought their websites to a public use capability. Jeff is correct in saying that "There should be a legend on the site that explains the abbreviations." Sometimes yes, some times no. Local assessors are like any other organization: They listen to their customers/users. Keep asking your local assessor for explanations to terms, phases, and abbreviations and they will clue in to the fact that they need a glossary on their website.

Most property assessment records are online, except very small jurisdictions that may have budget restraints to contend with. Ownership records are an essential element of their records. However, when foreclosures proceedings are ongoing the lender may either delay in recording a foreclosure, until the property is sold, or resell the property almost immediately if a short sale transpires. Frequent flipping can also cause a delay in the assessment records being current. And because the assessment office has other tasks to complete, ownership records may be two week to 30 days from current recordings at the county or city recorder's office. 

One advance of looking at ownership records of the local assessor is that they will assign a "sale code" to indicate whether the sale price reflect market value. Assessors typically "screen" raw sales data in order to use sch data in their next reassessment of similar properties.

Tax assessments on real estate vary from state to state. Some taxes have a cap on assessed values for real estate, but not all stated do. Some states have a cap on how much real estate tax rates can increase, but not all states do. For this reason and more (like abatements, homestead exemption qualifications) simply call your local assessor to get the information "straight from the horses mouth" as they say in Texas. Why speculate on what the grapevine tells you about such an important recurring expense item? And in this day and age, why not let the assessor in? Believe me when I say that local assessors are called daily by lenders, bank auditors, and investigators for various government-sponsored programs. When loan or application data doesn't match the local assessment records red flags go up! Then who loses? How much extra time do you have to explain why the local assessment records don't match what is in other data files?