Why Your Property Tax Value Increases While Your Market Value Declines

Last week I received a dastardly, evil-filled scrap of despair in the mail. This auto-generated mailing of doom was sent from the King County Tax Assessor’s office. Perhaps you received this friendly mailer as well?

Shocked beyond belief and still reeling from my previous year’s 60% increase in property valuation, the value of my home was raised yet another 10%! I gasped. My husband gasped. Our children gasped. The dog gasped. What else have I been reading and writing about for months on end, but subprime mortgage crises, foreclosures, and declining prices? Has anybody had a “half-full” view of the housing market? Apparently so, because this last 10% puts my property well over what we realistically could sell for.

Reading the flip side of the postcard, I should now consider myself informed. Appeals to the valuation must be submitted ”no later than July 1, 2008 [wasn't that last week?], or within 60 days from the mailing date on the front of this valuation change notice, whichever is later.” Needless to say, my morning was spent Googling “valuation appeals,” and I am now the victim of property tax tunnel vision. I feel a multi-part blog series coming on as I embark on this quest to have my property tax valuation reduced to set to equal market value.

First the “why,” later the “how.”

Googling the appeals process, I came up with a couple of interesting articles for background information to start. In June, P-I reporter Aubrey Cohen asks, “With house prices down, why are assessments up?”  According to his research:

The King County Department of Assessments bases annual values on sales over the three previous years. This means changes from one year to the next take longer to affect values, positively or negatively. In this case, values have risen substantially over the past three years.

Also, the 2008 assessments include no sales after Jan. 1. House prices did not start posting year-to-year decreases until February for the county and until March in Seattle. These decreases will start to show in next year’s assessments—since each year’s assessments apply to the following year’s taxes—will affect 2010 bills.

Did you get that? This means that despite all the doom and gloom surrounding all of us, and despite the fact that your next door neighbor may have had to foreclose on their home, it’s possible that you and I may continue to see increases in our property valuation until the year 2010! Mr. Tax Assessor explains:

The real estate market environment in King County indicates that, while the real estate activity level is slowing, sale prices and values were not declining and in typical cases were increasing up until January, 2008. The valuations have been based on three years of sales to mitigate speculation and provide the taxpayer with reasonable assessed values. The result is although most properties will receive a valuation increase in 2008 those values will still be below market value as of January 1, 2008. We will continue to monitor the market carefully.

That’s a difficult one for me to swallow because even if we get to a point where this three year market window that the King County tax assessor considers shows a decline in property value, I doubt if property taxes will ever be lowered; they are based on current budgetary needs and only distributed according to your property valuation. From the county website:

Property tax obligations are determined by 160 taxing districts in King County as they create their respective budgets for 2009. Simply put, the “amount” of tax obligation is determined by the taxing districts and the “distribution” of the obligation is determined by property values.

Furthermore, around the Sound, those in Snohomish and Pierce counties have already seen their property tax valuations decline as a result of the dismal housing market, though these homeowners aren’t likely to see any decreases in their actual property tax bill either, as summed up earlier by Seattle Bubble.

Coming soon (as I move onward with my own paperwork), the property tax appeal process… In the meantime…are you finding your most recent valuation in line with your assessment of market value? If not, are you planning on appealing your valuation? Or, if you have appealed in the past, do you have any useful tips on the process to share?