Inviting the Tax Man In

Last fall when we got our property tax bill, I got to wondering about the assessed value of our land and whether it seemed too high. On our tax notices, they split out the value of the land and the value of the structures, so you can see how they’ve assessed each component. Our land has the added complication that all but one acre are in “open space AG,” (OSA) the reduced tax rate given to land that’s in active agriculture status. The land is taxed at “current use” instead of “best use”, so it’s given a lower assessed value. I decided to do a little research to see how our values compare with neighboring properties.

Data Mining

Of course in the olden days this would have been a pain: I would have had to go to the county courthouse and have them pull manila folders for each neighboring property, and I would have had to look up the tax ID numbers first on a map. But nowadays, it’s really easy, you can just pull up the SCOPI map, browse around, and click on any property to see all of its data. That online county records database has to be the delight of nosy neighbors everywhere!

I made a spreadsheet, as I’m prone to do. It was easy to see that just about everybody around who has similar open space had their properties valued somewhere in the $550/acre range. The spread of 56 properties looked like this:

There were a few outlier data points, and I’m not sure what would cause those to be different, but clearly, OSA land is all valued pretty consistently.

That allowed me to back-calculate how much the county was valuing our one acre that’s outside of open space: and that was landing at about $65,000. So then I did a comparison to a bunch of non-open-space properties nearby, trying to get an average value per acre for the “hill properties” near us. That spread turned out to be strangely wide, out of 26 nearby properties:

But $65K per acre seemed on the high end, and I noticed the two lots next to us, which are smaller than typical for the area, also had these very high values per acre. I wondered, what the heck, are the three of us getting screwed somehow? 

The Voter-Tax Connection

I have noticed before that the County Assessor’s position is an elected one. In election materials, the candidate campaigns always put a lot of emphasis on fair property valuation- since that’s what we’re electing them for, after all. This last fall was an election year, and I had noted that the incumbent had used as a bragging point a very low incident rate of property owners formally contesting their property values. I think it was less than 1%.

And, I noticed in our property tax assessment mailer there were instructions for how to contest the valuation. With a huge note that said please call or email us before you file a formal appeal. Hmm, so that means they are motivated to try to make you happy so you don’t file a formal appeal, thus messing up their excellent statistics. I wondered, is it kinda like speeding tickets, where often they’ll knock off some of the price if you just show up in court? Worth a try, no?

Slicing the Land Pie

So I emailed my analysis asserting that our land values were higher than most, and asked for comment. Someone phoned me right away. The guy was very nice, and spent quite a bit of time discussing the subject with me. We seemed to mutually appreciate each other’s nerdy fascination with math, estimated values, and the interesting influences that are happening in today’s market. So it was a good and engaging conversation.

It turns out, how they do the property valuations is very straightforward and boilerplate. They refer to some nationally published, industry standard something (and he told me what it was, I just didn’t write it down). The data is broken down by region, and properties and structures get a very basic rating of crappy, average, or awesome (not those terms, of course) which will bump the value up or down from the median.

Where I had gone wrong in my analysis, in just averaging price-per-acre, is that for large lots, it’s really the first buildable acre that’s worth the most: $65K or so. Each additional acre after that is worth less. Once explained, it made perfect sense. And it meant there was no error in our property valuation. This explains why the small lots next door to us also had a high dollar-per-acre value as well, as I was comparing them to mostly properties of much larger size. If I take those same 26 properties and break out their first acre, then the value per acre of the remaining acres looks more consistent, where the additional acres are worth about $40K apiece:

Points for House Crappiness?

So, no dice on saving money on the land valuation. But while I had him on the phone, I asked about how the structures are valued. I felt like I had less insight into this, because just poking around in your neighbors’ property records doesn’t give a complete picture of how their homes are valued: there is just too much variation in home age and quality. Our structures seemed to be valued around replacement cost, which didn’t seem unreasonable. But it turns out this calculation is pretty boilerplate too: again it comes down to a median regional value for the size of the structure, and then it can be upgraded or downgraded based on the quality. And I spotted my opening.

Soooo…. If, say, theoretically, a house were to have holes punched in the walls from a re-wiring job, areas with open stud walls, cracking plaster, missing window and door trim, unpainted sheetrock, a plywood staircase, some of the plumbing fixtures currently not installed, floors badly in need of refinishing and a general cosmetic impression of tackiness…. Would that downgrade the value at all?

Oh yeah, the guy said. That could make quite a difference in the structure’s value.

Would it be possible for me to give you a tour of our home?

Do Come In, Mr. Tax Man

And thusly, within a week, two very pleasant tax men swung by and I showed them every room in our house! I’ll grant, it’s not every day that one proverbially invites the tax man over for tea. I give them extra credit points because they were old house fans, and thought our house project was cool, and they seemed to enjoy the tour and discussion. One of them remembered enough about this property to know how much we’ve done with it.  He’d assessed it years ago when it was a blackberry jungle with a collapsing 1905 barn, a rat’s nest of barbed wire, and two tons of metal debris strewn about.

You see, when people visit, it’s clear very quickly whether they think we are nuts, or really have something going on. People are always polite, but you can see new house people swallow their horror. For one, new house people don’t know how to fix things, so a house with a lot of broken stuff must look terrifying to them. This always amuses me, because I’m the opposite; I like to fix things, and I’m bored if there is nothing to fix. (I always joke, if we ever finish this place, we’ll have to move.) And, I’m always appalled by the shoddiness of new construction, the blasé sameness of granite countertops, anemic oak veneer cabinetry, too-close neighbors, and faux Craftsman details made out of T1-11. I would hate living in a new house. But these guys, they were not new house people. They understood the vision, that say, several decades from now when we finally get around to fixing the holes in the walls, this could be a really great house.

Dividends for the Asking

But right now, of course, it’s not a nice house. So, bottom line: they knocked about $23K off the value of the house structure, equating to about 20%, which translates to a current savings of about $253 per year. Not huge, but worth my spending an hour or two on it. And this may benefit us for years to come and as taxes grow. At least until such day as they assume we’ve finally fixed everything that’s cosmetically lacking in the house and they bump our value back up.

I should note a caveat here, which we entertained before doing this: I think it’s possible that some people would not want to lower the assessed value of their house. Though the value is mostly used to figure taxes, it is also looked at by appraisers and banks as a starting point when valuing a home. So, for people who anticipate needing to take out a second mortgage, re-finance their home, or sell within a few years, they may actually want their assessed value as high as possible. But we dismissed this issue because we plan on living here a long time, and we don’t anticipate needing to refinance in the near term.

Anyway, the moral of the story: it never hurts to ask!