Top Real Estate Articles

Understanding Prop 13 Assessment

May 31, 2009 Real Estate Properties

California only allows two things that initiate a re-assessment: transfer in ownership (also called a transfer) and new construction. A transfer in ownership is when any part of the ownership interest in the home has changed whether money changed hands or not. The Assessorss Office will review the transfer to see if its re-assessable. If it’s an assessable change in ownership, the data is sent to the appraisal staff to give or review the value and modify the base value appropriately. A change in ownership that isn’t assessable must have fallen within the parameters of an approved exemption. A transfer into a revocable trust or an inter-spousal transfer that are both examples of exemptions allowed in California articulated in our Inherited Property and Exemptions Guide detailed in the California Little Black Book.

When a transfer is exempt, the ONLY way the Assessorss Office knows this is through forms and/or applications which are recorded along with the deed or later requested by the Office of the Assessor to confirm an exempt transfer. So when there is no exemption, the transfer in ownership is considered assessable per Prop 13. Which means if you do not apply for the exemption, submit a form or offer accepted documentation for an exemption, the transfer is considered assessable automatically. The Office of the Assessor is a mass assessment organization and unless you tell them what you need preferably through forms and documents they wont know what may or may not apply to your change in ownership.

The other trigger for re-assessment based on Prop 13 is new construction. The Assessors’s Office is told by the city or county building and safety offices. The city or building and safety give the information about issued permits to the Office of the Assessor for property tax purposes. Keep in mind, your city receives some of your property tax dollars so though its primarily a state tax your local municipality benefits from it. The permits are given to the real property appraisers to update the building record and change the base value if warranted based on Prop 13. Normally, it takes the Assessors’s Office a fair amount of time to get to since field work is necessary to find out what was done to your house and then a valuation process. If there is a demo, your property taxes will likely be reduced, if there is an addition there is likely going to be an go up. So, if you demolish a pool your property taxes will decrease and if you add a pool, your property taxes will increase. Construction varies from home to home and it will be reviewed based on the value that was added or taken away. This is clearly explained in the California Little Black Book with examples and scenarios. When was employed by the Assessor I assessed countless homes where various types of construction was done and would be happy to answer any questions you may have pertaining to this!

Like new construction there will be a re-assessment of a property if the use of it changes. For example if a complex of co-ops is converted into condominiums the Assessor will reassess the value of each unit because the change affects the market value of each unit. However, generally in California there are two events that trigger re-assessment based on Prop 13: change in ownership or new construction.

About the Author: Valerie Faltas, Property Tax Expert has been involved in all facets of real estate for over ten years including assessments, appraisals, estates and trusts, investing and much more. She is a Certified Property Tax Appraiser, Licensed Residential Appraiser and a member of the International Association of Assessment Officers. As a real estate investor and advisor she is well versed in all aspects of real estate. To contact Valerie Faltas go to her website: www.propertytaxlittleblackbook.com.

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What the Assessor Won’t Tell You About Prop 8

May 29, 2009 Real Estate Properties

When the real estate market is decreasing like it is now and has gone below your assessed value, you are allowed a break in your property taxes. Prop 8 Decline in Value is an exemption to California Property Tax Law which determines all property taxes today for property owners in California. Prop 13 was put into place in 1978 to limit the property taxes paid by taxpayers. Prop 8 is an exemption to Prop 13 which says that your property tax value should not be higher than the current market value.

Seems like good news but, it is only a TEMPORARY answer. Prop 8 Decline in Value is something you have to file for most of the time. Sometimes the Assessor will automatically lower your property taxes because he is an elected official and will do what he can to maintain voter approval. Prop 8 Decline in Value works is like this: your date for any fiscal year is January 1st for assessment purposes. The comparable sales for your home for need to have closed within the first quarter of the given year; January 1 to March 31 based on the language of the law. So to get a The Prop 8 Exemption reduction for 2009, the comparables must have closed between January 1st, 2009 and March 31, 2009. To get this reduction in value there has to be comparable sales of properties similar to yours within the first quarter of the designated year that are lower than your assessed value for that year. If there are no comparable sales that show a lower value for your home during that first quarter, your are out of luck.

This is a major problem for many reasons: one of the biggest is that the first quarter of the year has the fewest comparables because those sales started during the holiday season which is the slowest time for real estate, no matter what type of market we’re in. Real estate sales take 30-60 days to close, so most of the sales that close within the first quarter of the year opened escrow during the holiday season. The comparable sales to choose from are much less than later on. When the decline really starts to show during the second and third quarters of the year you can’t use those sales for a Prop 8 Decline in Value reduction.

This is not a great solution because it is only a SHORT TERM reduction in value, so when the real estate market goes back up, and it always does, your assessed value goes back to what it would have been had you never gotten the break. Numerous property tax specialists appear in declining markets offering to save you on property taxes. They send direct mail that look official and from the Assessor which they are not and unfortunately , people pay hard earned money to have their property taxes “reduced” only to have their tax bills revert back once the market recovers. Truthfully you never pay the Assessor for any service or review of your value - you pay for that with your property taxes already! Generally, the form you will out with the Assessor is simpler than the form these companies send you in the mail!

A typical example of a Prop 8 Reduction on an average house in California. So, I bought a home in 2005, at the hight of the market, for $500,000, at a 2% trend my current assessed value for 2008 is $530,604. My market value as of the first of 2008 is around $430,000 and as a knowledgeable tax payer I apply for a Prop 8 Decline in Value to get a reduction. So, for 2008 I have a nice break, Im paying property taxes on a value that is $100,000 below my trended base value and saving around $1,250! The real estate market goes down and based on the Assessors review, the Prop 8 Reduction value is still given for 2009. So for 2009 I am paying based on the $430,000 which is even better this year since my trended base in 2009 would have been $541,216 and so I am saving close to $1,390! Great!

Now, the real estate market starts to turn around, and the market values are going up and for 2010 my market value is upwards of $500,000, so the Assessor’s Office alters my Prop 8 Reduction value to $500,000 which is lower than my 2010 trended base value of $552,040. Absolutely, not as good as having $430,000 as my value. Yet, I am still saving and this year my Prop 8 Decline value is $52,000 lower than my trended base value I am now saving $650 a year in property taxes. Its now 2011 the market is going up again and now my market value is somewhere around $600,000 and the assessor restores my value to the trended base, which now is $563,080. So, now I’m paying $7,038 in taxes. I so wish I still had that $430,000 property tax base

There is a way in California to PERMANENTLY reduce your property tax base in today’s declining market, utilizing Current Property Tax Law and essentially bypassing the Prop 8 Exemption and all of its limitations. Additionally, find out how to avoid reassessments when you have inherited property and also how to utilize all the exemptions allowed by Prop 13.

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About the Property Tax Expert

May 29, 2009 Real Estate Properties

May of 2003 I applied to be a Real Estate Appraiser Trainee with the Los Angeles County Assessor as one of 900 applicants for 25 positions. Part of being a trainee included an 18 month probation period and a 12 month training program with including classroom education, several exams, field training in all facets of real estate appraisal, property tax law and the processes in place within the Assessor’s Office. If I failed any one of my exams or received a bad review by my trainer I would have been kicked out and let go.

At the end of the year long training I took an exam with the State Board of Equalization to be Certified as a Property Tax Appraiser. I was promoted from Trainee to Appraiser. Independently, I chose to become a licensed Residential Appraiser through the Office of Real Estate Appraisers meaning I could do private appraisals also, ones used by banks. I personally purchased my first home at the age of 23, my second at the age of 24, my third at the age of 25. While I was learning appraisal and assessments I was also buying, selling and repairing homes so I saw all aspects of real estate. Additionally, I was the administrator of a family estate while in college so I had already had a background in trusts and estates and my experience working for the Assessor and in real estate had shed light on what I had done years earlier with my family.

Being employed by the Assessor is considered to be impressive given the nature of the job. Determining values, the public paid property taxes based on the amounts I determined. I affected over 6,000 properties in Los Angeles County while I worked for Assessor’s Office|Assessor|Office of the Assessor. The prestige comes from the nature of the position and the understanding gained through it. There is definitely a blown up sense of power that goes along with the position; if taxpayers really saw the other side and fully understood the law and how it works, the prestige would be gone. The bottom line is always the numbers.

My job changed with the real estate industry: different types of work during different types of markets. I had a great reputation within the Office of the Assessor, was known for being fast, proficient and thorough. I was chosen by higher level management several times to work on different projects and help with other departments within the Office. When I left the Assessor to go to law school (which I dropped out of), months even up to a year after I left, taxpayers would ask for me since I would help them more than others who worked there. Even the clerks in the office would come to me with problems since they knew I would assist them. I had a bright future with the Assessor and would have risen through the ranks had I chosen to stay there.

NATIONALLY: In just about every state in the US property taxes are a percentage of market value. Market value is the critical factor. The greatest issue is that every Assessor’s Office in every county in all states is a massive assessment government entity. They have hundreds of thousands of valuations to complete year after year and usually don’t have enough man power to do the work based on quality instead of quantity. The Assessors exists to serve, to do their jobs to follow the law and to be as fair as they can be. Frequently values aren’t what they should be simply because they don’t have the time or the man power to be more thorough.

CALIFORNIA: California Property Taxes are unique and very different than the rest of the US. When the real estate market started to really decline homeowners started calling and coming in looking for assistance. I was helping homeowners get the temporary tax break called Prop 8 and I knew a much more effective break they could get. I know a way for homeowners in California to get a PERMANENT break in their property taxes. The average taxpayer in an urban area lost over a $250,000 in value which equates to $3,000 PER YEAR in property taxes! Completely legal, just sort of out of the box and it wasn’t okay for me to share. Most who work for the Assessor aren’t aware of this loophole! Day after day, homeowner after taxpayer…I knew a better way. Often they wouldn’t qualify for the temporary break based on the way its written. I felt compelled. I felt compelled to make this understanding known so that I could help taxpayers in a bigger way. So, I left, created the Property Tax Little Black Book.

If a homeowner can get your loan modified to permanently reduce how much you owe the bank for your house why shouldn’t the same apply to your property taxes? The law is ALWAYS on the taxpayer’s side…you just don’t realize it!

While I worked for the Assessor I processed single family home values at 3 or 4 an HOUR… some were higher than they should have been since I didn’t have the time to make sure they were right and some were lower also. Only if the homeowner complained was the assessed value researched. All homeowners need to learn some basic appraisal and assessment to ensure they are aren’t overpaying property taxes. Understanding is the key. Every homeowner can understand and handle this process to feel in control of what they are being taxed on their house.

The Assessor is afraid the people because the homeowners are the ones who keep them in office. The Assessor’s Office doesn’t want to deal with a disgruntled homeowner!

Bottom line: the Assessor is not out any homeowners. Uderstanding and dispelling fear in times like today. This is the GOOD news about this low real estate market! Its time for taxpayers to save and empower themselves. A low real estate market allows for modified loans and lower property taxes! The real estate market is down and this is how it can assist you! This is one of the numerous reasons this economy is good!

My vision, my goal is to empower the homeowner! No more fear. Fear comes from ignorance and my goal is to educate and ultimately dispel fear. In a time of turbulence and change, it is more true than ever that knowledge is power. - JFK Feel free to contact me! I look forward to hearing from you.

About the author: Valerie Faltas, Property Tax Expert has been involved in all facets of real estate for over ten years including assessments, appraisals, estates and trusts, investing and much more.

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Does Prop 13 Still Apply Today?

May 28, 2009 Real Estate Properties

Current California Property Tax Law does apply today to all property owners in California. Prop 13 was enacted in 1978 to control the amount of property taxes paid by homeowners. Prior to Prop 13 there was no limit on property taxes. The assessed value was based on the changing market value every year and because the market values increased significantly over time in California, the amount of property taxes increased significantly. As the values of the homes increased over time, older folks were being driven out of their homes unable to pay the property tax increases.

Prop 13 was passed to assist seniors on fixed incomes who could not adjust to increasing property taxes. This amendment was initiated by Howard Jarvis was a result of a ballot initiative passed by voters in June of 1978, called People’s Initiative to Limit Property Taxation. Current California Property Tax Law is an amendment to the California State Law and is still a hot topic today because of its limiting nature and the imbalance it has created in terms of how much each taxpayer pays. Taxpayers who bought thirty years ago dont pay nearly as much in property taxes as those who have acquired homes recently and as a result of this many taxpayers feel Prop 13 is unfair and should be repealed.

Current California Property Tax Law applies to all who own property in California even those who have purchased recently. What Prop 13 does today is establish a cap on the amount of property taxes the government can charge you. The initial purchase price of your property, as long it was a market transaction, becomes your base value.

A market transaction means that as long as your purchase price was market value it will be accepted as your taxable base value. If you paid well below market value for your home the Assessor will assess you at market value because that is what California Property Tax Law states. Your assessment is based on market value as of the re-assessable event and if your purchase price was market value the Assessor will accept it as market value. If not, the Assessor will determine a value for you.

Usually, most California Homeowners pay close to 1.25% of their assessed value in property taxes per year. For example if your assessed value is $100,000 you would pay about $1,250 per year in property taxes. The difference between your base value and your assessed value is very simple. Your base value is the value established as of the date of a re-assessable event usually when your purchase your home. The assessed value is the amount you pay taxes on for a designated year since all base values in California have a 0-2% increase per year based on Prop 13 and the Consumer Price Index rates for inflation in a given year.

The base value is the value property taxes are based on and then it increases slightly every year. Generally, most Californians pay about 1.25% of their assessed value in actual property taxes per year. So as your base value increases every year raising your property tax value year to year, accordingly what you pay in property taxes increases. Remember the amount you pay is limited based on State Law. So even if the market sky rockets and your property value increases substantially, your property tax base wont increase along with the market it is limited to the 2% trend based on State Law.

About the author: Valerie Faltas has specialized in Property Taxes for the past 5 years and has produced a free report that exposes the truth about Prop 13 and Prop 8. Check out our FREE California ebook which explains Prop 13 in more depth with examples! Feel free to contact me with any questions you may have! Get your free report on Prop 8 and Prop 13 now. You have full permission to reprint this article provided this box is kept unchanged.

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