Why your property tax assessment is wrong

Fulton County's chief appraiser, David Fitzgibbon, speaks at a town hall meeting in Alpharetta, June 30. (Jonathan Phillips / Special)

Fulton County’s chief appraiser, David Fitzgibbon, speaks at a town hall meeting in Alpharetta, June 30. (Jonathan Phillips / Special)

If you buy a book for $10, the state doesn’t say, “We think you ought to pay tax on $20.”

If you earn $50,000 a year, the IRS doesn’t say, “We think your job is really worth $60,000, so pay income tax on that amount.”

If you’ve received a property-tax assessment lately, you might see where I’m going with this.

Homeowners across metro Atlanta are receiving notices indicating their taxes may rise by thousands of dollars this year. At a June 24 town hall meeting I attended in Buckhead, more than a dozen Fulton residents said their assessments were at least 60 percent higher than last year.

The property tax may be the most despised tax in Georgia because it seems to be based on arbitrary, unpredictable calculations. The calculations may be unpredictable, but they’re not arbitrary.

They’re worse than that.

Unlike sales and income, not every property has a transaction on which a tax can be based. So, state law requires property assessments based on “fair market value.” Fulton’s chief appraiser, David Fitzgibbon, tried to explain that requirement, and how his staff attempts to meet it, to some 250 people at that town hall meeting. Percentage increases aren’t a factor.

“We’re not going to let that affect us if it was $300,000 last year and it’s $1 million this year, if we have it right this year,” Fitzgibbon said.

No, the problem is not that the calculations are arbitrary. It’s that they’re almost certainly wrong, as any high school economics student should recognize.

The conceit here is that appraisers can take the prices from maybe a dozen home sales in an area and extrapolate them to hundreds of similarly situated homes as if they’d all sell for comparable prices if they were on the market at the same time. They may not think about it that way, but that’s essentially what they do.

No one familiar with a supply and demand curve can believe this is correct. Even if every house on my (hypothetical) street were the same, and three of them sold for $200,000 apiece, the chances are virtually nil that there would be buyers for all 30 of them at that price within the same calendar year. All things being equal, the price would fall. Property assessments defy this law of economics, usually to the benefit of government coffers.

The market is proving the appraisers wrong as we speak. One reason prices are soaring in some neighborhoods is too few people are willing or able to sell their homes, even as prices rise. When dollar signs do entice additional sellers into the market, they often find there aren’t enough buyers with that kind of money. The prices of those that sold don’t justify higher valuations for the ones that didn’t, much less the ones that were never even on the market.

Still, year after year, county appraisers pretend they do. To the extent four-digit tax increases push more homes onto the market, these assessments could halt the real-estate recovery.

The answer is not to improve the assessments. Nor is it to scrap the property tax altogether; county governments (and cities, and school boards) would just find another way to replace the hundreds of millions of dollars that tax raises each year.

What is the answer? Click here to read on.

Reader Comments 0

48 comments
Bill Zorn
Bill Zorn

this writer's reasoning is absurd. 


assessing all properties at the value they would have if all were simultaneously marketed would be ridiculous; it would bear no relationship to reality. 


if market value is to be the basis of assessments, it should be based on a real-market estimate.

AvgGeorgian
AvgGeorgian

Could you not peg property tax increases to a measure like cost of living until sold, and collect discrepancies in added value then? Commercial properties would need a different method as they realize value changes more frequently through rental.

LogicalDude
LogicalDude

A cliffhanger????


KYLE!!!


And tax value should be assessed based on recent sale prices and actual sale price of the home.  (I thought this is what the homestead exemption covered - so that your home suddenly isn't taxed more than you bought it for.)


If someone bought a house for the long-term, and retired there, they don't have a mortgage, and yearly taxes usually aren't a burden.  But suddenly tripling or quadrupling the taxes can be a burden and people lose their homes. 

I do not think that's what the districts intend. However, to meet their possibly bloated budgets, they fiddle with the numbers.


Look forward to seeing your answer (online). 

FIGMO2
FIGMO2

Sounds like real estate comparables.

Comparables should be as similar as possible to the subject property, and at least three or four should be used in the appraisal process. The most important factors to consider when selecting comparables are the size and the location of the subject and the comparable properties. The location is extremely important because it can have a tremendous effect on a property's market value.

Location, location, location...

Clayton County's property tax assessments went down this year. 

Wascatlady
Wascatlady

@FIGMO2 Also,as I understand it, they don't look at sales THIS year, but sale prices LAST year.

Kyle_Wingfield
Kyle_Wingfield moderator

@Wascatlady Yes, the value is supposed to be as of Jan. 1 this year, based on sales the preceding 12 months (more recent if possible).

autygr
autygr

Nope that is illegal per state law. In every state court case ever the assessors have admitted that is only a procedure but not the actual law. They can most certainly consider all sales at any time. Even this year's sales.

However they will not tell you that until they get to court and are under oath.

Look at ocga 48-5-311 it only states "best information available. "

GB101
GB101

I am confused.  If the assessors' model assumes that the comparables are all on the market at the same time, wouldn't that produce a bias toward assessments that are too low, not too high?  

Kyle_Wingfield
Kyle_Wingfield moderator

@GB101 The model would produce that kind of bias if it recognized that's what it was doing. I'm arguing that it doesn't recognize that aspect, producing a bias toward higher assessments.

Lee_CPA2
Lee_CPA2

A simple solution would be to pass a law that would require counties to purchase your property at the assessed value if you appeal and still do not agree with the assessment.


And it is not just real estate.   The county depreciates equipment down to 30% where it will stay until disposed.  You can have  equipment that is only worth scrap metal price and they will still tax you on 30% of the purchase price of the item.


That said, my county seems to be fairly accurate.  Meaning, I wouldn't sell it for the assessed value.

autygr
autygr

@luksatl yep gentrification due to property taxes has decimated the neighborhood of Dr King jr. Historically lower income residents like my neighbor ms Jackson (here since 1966) are being forced to sell. She doesn't want to move but the county told her she has no choice. Pay the increase in property taxes or the sheriff will sell her house with a tax lien.

stogiefogey
stogiefogey

Putting together an effective appeal of a property tax assessment can take some time. I think a lot of people would rather just pay up than make the effort.

Maybe I've been lucky, but each of the several times I've appealed an increased assessment (or failure to lower the assessment sufficiently as property values slid) my proposed adjustment was accepted.

lvg
lvg

No annual property tax in communist China; deed is good for 70 years

MANGLER
MANGLER

I'd be forced to appeal, then appeal, then appeal ... then just say no - and deal with the risks that follow.


Situations like this will also greatly reduce the interest that younger residents have in planting roots in the community and becoming homeowners.  If rents get out of hand, just up and relocate.

MHSmith
MHSmith

@MANGLER


Spot on. 


Property taxes are not the same in every county and renters have the advantage in this situation, they can lower their taxes and rent by simply moving. 


Vote with your feet.

Lukasatl
Lukasatl

@autygr in three years the value increased from 325,000 to 1.2 million? now if your friend could only sell it for this price ... and retire ..

autygr
autygr

Nope no rebuild. And it is not an isolated incident we have hundreds of them. The average median increase was double last year 100%+..Everybody got jacked in our hood.

And get this no sales over 600k ... ever! But we have homeowners assessed over 1.6 million. ... explain that.

Claver
Claver

@autygr Hard to figure out what is going on with this house.  Zillow values it at $510,701.  But, the square footage listed in Zillow is 2,734, which is half of the 5,468 listed in the county assessment.

Pub Heaven
Pub Heaven

Let's have a law that the assessing government can tax it at their valuation, or purchase it at that value. Your choice...

Pub Heaven
Pub Heaven

If Gov-R-Really-Us, we would be happy to see inflated valuations.

But We-R-Not...

Kyle_Wingfield
Kyle_Wingfield moderator

@332-206 "If Gov-R-Really-Us, we would be happy to see inflated valuations."

Why?

"But We-R-Not..."

OK, then who else would the money come from in your scenario?

Tenenbaum
Tenenbaum

Yes, but if you buy a cell phone from Costco,  you pay sales tax on the non subsidized price. I once bought a phone there $199.00 and paid about $48 in sales tax. I returned the phone and bought it from Costco ' s wireless online for $12.00 in sales tax.

straker
straker

Barry


Most of us are not juveniles living at home and having our well off parents taking care of us.

LilBarryBailout
LilBarryBailout

Property tax in most every county of Georgia is a pittance and not worth stressing over.  Just hand the bill to your accountant and have her pay it.

TicTacs
TicTacs

@LilBarryBailout  Sounds like you live in a trailer, based on that comment .....and some of the double wides cost more than old stick built homes.

LilBarryBailout
LilBarryBailout

Apparently the suburban Atlanta county in which I live is better managed than others and does not require its citizens to pay exorbitant amount of tax.  IIRC, my property tax bill is about 1% of my home's value.

LilBarryBailout
LilBarryBailout

@Lukasatl @LilBarryBailout

I thought only people in New Jersey paid property tax like that!

Based on my two minutes of in-depth research, it appears that Dekalb, Clayton, and Rockdale counties pay three times as much as most other counties.  I guess those world-class schools don't pay for themselves!

TicTacs
TicTacs

Fair market value is what you could get TODAY,  or at an auction where anyone can buy it now. Assessments are not correct as they take into sales that could have taken months along with moneys in the pocket of realtors and bankers, not the final amount the seller gets.


And to top it all,  the school board has their hand in you pocket because the state won't fund the schools as required by the state constitution.


Appeal,  you will lose but if 5% appeal the digest is held up and they get panicky and let some off the hook easier.


Good luck,  Income taxes are a better way to fund gov't, not this way.

Rebar6
Rebar6

They are not appraisers, they are assessors, big difference! Mass assessments are a requirement of State Law.

Dearie
Dearie

And when you do try to appeal your tax valuation, ever wonder what credentials the members of the board possess? 

Well having just received an appeal letter from Paul L Howard, Jr. Fulton County's District Attorney asking me to apply to be one of the 3 members and 6 alternates, the main criteria is someone who will sign on for three years, work 2 - 3 days per week from 8:30 - 4:00 and get paid $65.  No request for educational background, no experience requirements, just random people applying to make these decisions.  It seems to me that without solid background in real estate and economics, decisions must be made with emotions or possibly prejudice going either way.

Wascatlady
Wascatlady

@Dearie In our county, the committee to whom you appeal are all high school educated white haired people who take the training (how to look awake, nod,  and say no)  They do what the appraiser said, even when confronted with multiple sources of evidence that show the assessment is flawed.


In my experience, anyway.


I am fortunate,however, because my taxes (2000 sq ft, 2+ acres, older home, in country) run about $400 per year, including $300 for schools.  Soon I will pay less, due to age, unless that is taken away.  My neighbor has 10 acres and a $250,000 home and pays less than $75 due to his age and land use convenant agreement.  Of course, we have few amenities except for deer, bears, foxes, possums, coyotes, raccoons,skunks, and a fair amount of quiet. We also have no water department, no trash pickup, and no enforcement of zoning (think of what that means).

Lukasatl
Lukasatl

This is called a back-door tax increase. Run up the appraisal, and if no one appeals, you (the county) gets more money

gt9281c
gt9281c

Kyle,

I think you might be wrong on the approach that they're taking.  Instead of assuming all houses are on the market at the same time, it might be closer to the idea of determining the price if that house and only that house were added to the market.  It's possible that an additional unit at the margin might not affect prices all that much.

I had my own issues with the Fulton County assessors a few years back.  I had more problems with their assumptions (trying to say that foreclosure properties didn't affect price) than with the economic method.

Kyle_Wingfield
Kyle_Wingfield moderator

@gt9281c I agree that's their approach. But when they apply that to every house, they're also assuming no change in demand; in fact, they're assuming infinite demand.

MHSmith
MHSmith

@Kyle_Wingfield @gt9281c When establishing fair market value I was always under the assumption they looked at a fairly large area and took an average dollar amount of all homes sold  in that area to arrive at a "market assessed benchmark" and went from that figure and added in for things like pools, decks, patios etc.  Usually they use zip codes the areas in real estate to arrive at market assessed benchmarks and go from there adding by merit for conditions of, and amenities on, the property.   .


After reading what you wrote today I'm sure my assumption was wrong.

JackClemens
JackClemens

Oooh, a cliffhanger. Since I live outside the paper's sales zone, I'm looking forward to Monday.

straker
straker

I live in DeKalb county and my assessment went WAY up from last year.


I wonder if having to pay a double salary for Dekalb County Commissioner has anything to do with this?  

RafeHollister
RafeHollister

You are right there is no consistent system, but it is a rigged game.  If enough folks fight the appraisals and win, rare but it happens, then they just rate the millage rate and get the money anyway.  


Government always says they can't make it on the revenues they currently receive so they need more.  They never consider that you might be in the same shape they are.  You are just on your own to figure out how to pay these higher taxes and still feed the family.  ..