Financing in California>Question Details

seller0101, Home Seller in San Jose, CA

How is the property tax calculated? by purchase price or county assessed value?

Asked by seller0101, San Jose, CA Mon Apr 12, 2010

I am buying a property for $250k, but the title company use $300k to calculate the tax, why would that happened?
The property on average worth $300k in the area which my property at, but my property is not in good condition, so I can buy it for $250k...please advise as I will close escrow tomorrow. Is there anything I can do to reduce the tax?? I don't want to pay the $300k tax for $250k house.

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Thanks, I talked to the title company today, they said it should base on the purchase price...still not clear though.
0 votes Thank Flag Link Tue Apr 13, 2010
Although Jason is technically correct---taxes are based on assessed value--it goes beyond that.

You then have to ask: Where do the assessments come from? Assessments are meant to generally reflect the value of the home. So usually the county will look at price trends in a particular community or particular area, including recent purchases, and adjust values accordingly.

Sometimes, the county will "re-set" a property's assessment when it's sold. And that makes sense. Sometimes, over the years, the general adjustments a county does don't exactly reflect the true price changes. And little errors build up. That's why buyers and sellers are told never to use an assessment to determine value. It's just not accurate.

So, if your county resets a property's value after a sale, yours may well be adjusted--in your case, down to $250,000 to reflect the true value of the property. It should be fairly easy to find out your county's policy. Just ask. And, looking online, it appears that Alameda County will reassess when you buy. From its web site: "Under Proposition 13, real property is reappraised only when a change in ownership occurs, or after new construction is completed. Partially completed new construction is also added as of January 1. Generally, a change in ownership is a sale or transfer of property, while new construction is an addition or improvement to property. Except for these two instances, property assessments cannot be increased by more than 2% annually unless the Assessor has previously granted a temporary reduction due to market value decline." See http://www.acgov.org/assessor/assrinfo.htm#assess

Also from Alameda County's web site (same page): "Change in Ownership Reappraisals
When a transfer occurs, the Assessor receives a copy of the deed and determines if a reappraisal is required under State law. If it is required, an appraisal is made to determine the new market value of the property. The property owner is then notified of the new assessment and has the right to appeal the value. Interspousal transfers do not require a reappraisal."

So your assessment should drop to $250,000. However, you will want to stay on top of that and if a future tax bill continues to reflect a value of $300,000, you should protest it. Based on the county's web site, you should be able to get the assessed value down to $250,000.

Why did the title company use $300,000? Because that's the most recent assessment. That's what's being charged now. That's just the way it's done.

So: Keep an eye on what the county does. But, from what it says on its web site, your assessment should drop.

Hope that helps.
0 votes Thank Flag Link Tue Apr 13, 2010
Don Tepper, Real Estate Pro in Burke, VA
MVP'08
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I am in Alameda county California...
0 votes Thank Flag Link Mon Apr 12, 2010
Doesn't they consider the condition of the property? A property in good condition can sell $50k more easily, that's not fair for us have to live in a house with no upgrade and poor condition property and paying the same tax.

I heard Lots of states have begun to value property at the last sales price, in which case, the assessment would self correct, at your purchase price?
0 votes Thank Flag Link Mon Apr 12, 2010
Taxes are based upon the value (as appraised by the county appraisers) and not the sale or purchase price, per se. It may be the fact that you are purchasing this home for $50,000 less than what the tax office says it is worth (its value) and therefore the that explains why the title company is calculating your taxes on the $300k price. You can file a protest of your property taxes each year, if you feel the value is too high. Contact your local tax appraisals/assessors office for guidance.
Web Reference: http://www.JasonPeebles.com
0 votes Thank Flag Link Mon Apr 12, 2010
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