The Tax Collector Can Be Your Friend

The Tax Collector Can Be Your Friend

Author: Ken Jordan

Early in January, the Rutherford County Tax Office, and several other counties in North Carolina sent out notices of new Real Estate Valuations. The tax office is legally obligated to collect property taxes based on 100% of the "true value in money." These valuations represented the tax office´s best guess as to the price at which the property would change hands.

For example, when Buyer B purchases a property for say $585,000, that purchase price represents the "true value in money" that the property was worth to the buyer.

However, because the tax office reappraisal is completed as much as 18 months before the new values are made public, the tax value will seldom reflect a recent sales price, so the Buyer´s new tax bill will be less than what they paid for the property.

However, 4 years later, when the property is again reappraised by the tax office, that $585,000 sales price will be factored into the tax office calculations. Because the tax values are not set for individual properties but are instead calculated for a group of similar properties, the new appraisal in 2011 may still be lower than the price paid in 2007.

Assume that we sell a property in January 2007 for $585,000. The tax value has been $170,800 since the last reappraisal in 2001. In January 2007 the tax value increased to $300,000 and that tax value will remain in place until January 2011 when another reappraisal becomes public. Taxes collected in January of 2008 through 2011 will be based on $300,000.

The county commissioners and town council can change the tax rate every year if they are so inclined and that would impact the annual tax bill. Normally this change will only be a small percentage and it would be made during a public hearing, so a property owner can express their opinion to the council.

As part of the reassessment process, in January 2011, the tax values will be based on all comparable sales in the most recent 4 year period and undoubtedly the tax value for the property we sold will have increased since 2007, but even then the value of that specific property may not be equal to the $585,000 sales price of 2007.

We can therefore say the Tax Office is your friend because in spite of the fact that taxes will undoubtedly continue to increase, your property will only be reappraised every 4 years and taxes will seldom, if ever, be based on the most recent sales price.

Buyers can be assured, therefore, they are paying taxes on a value that´s less than the actual market value of the property.

Sellers can see that in spite of the significant increase in tax value, the actual market value is still larger, and the value of their investment has continued to increase.

If you want to learn more about the ins and outs of this area, contact The Lake Guys at 828-625-5242 or 828-625-9439. Our website is http://www.lakeguys.com