Foreclosure in Annapolis>Question Details

bonbon, Home Owner in Edgewater, MD

What impact will the lower tax assessment have on the housing market?

Asked by bonbon, Edgewater, MD Thu Jan 10, 2008

In my area (Anne Arundel County, Maryland -- or, more specifically, Annapolis), the tax assessment on homes for this year is about 10-15% lower than for the last year. As such, many houses on the market are now listed way above the tax assessed property value, which calls for further price reduction.

Now, I understand that there is a difference between the assessed value for tax purposes and the appraised value. However, the true value is what the buyers will pay for any given property. Given the market conditions, the oncoming recession, and the overall grim economic outlook, there is little chance that buyers will be paying anywhere near the listed prices. I know that, given the possibility of further decline in the market, I won't be offering even the tax assessed value (which could insult sellers, but I think it's justified). I have even seen an analyst from Merryll Linch (I believe) on CNN talking about 20% adjustment in home values in the next year or two. Please comment.

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Stacey A. Martin’s answer
Hi Bonbon, you really hit the nail on the head with a specific part of your question - buyers decide the value. However, real estate agents and appraisers use current sales comparisons to establish listing prices and to confirm negotiated sale prices as a good risk for the bank. It may take a long time, if ever, before the transactions daily in that area bring the market values down to the range you are suggesting.

In Massachusetts, we are already seeing an upswing in showings compared to the last several months. By the details in your question I can tell that you are pretty well informed about how this stuff works, but I'm not sure you are including the rise in demand as buyers who have been sitting on the sidelines for months stop worrying about the bottom and decide now is the right time for them.

Will your low end offers insult a couple of sellers? Likely, but it is also possible that you will find that one gem who has the motivation to take the loss and accept your offer. There are some sellers out there who would be grateful to see anything on paper! How do the lower tax assessments affect the market? I am sure there is an affect of some kind as there will be folks on both sides who follow your logic - but putting any number to that idea would be purely speculation, in my opinion. Looking forward to seeing what other folks think about this, Stacey
1 vote Thank Flag Link Thu Jan 10, 2008
Bonbon - as you indicate, county assessed values are not "market" values and the assessed values are really a function of how your county/state handles the home valuation process.

For example, in Colorado, the valuation process is completed every 2 years during the "odd" numbered, in May 2007 my home was given a new value.....the value was based upon market values from 2005 and the first 6 months of my home's valuation was based upon data that was 1-2 years old - that valuation will remain in place until May of if you were looking to buy my home in early 2009, the county's value for my home would be based upon data that was 3-4 years old. I am sure you would agree, the county's valuation of my home is probably out of date and different than the actual market value at that point.

So, depending on how your county /state does the tax valuation process, the county assessed value could be significantly different than the actual "market value" when a home is on the market.

Homes are still bought and sold house by house, neighborhood by neighborhood - I am not downplaying the analyst's comments as there probably are neighborhoods in the country that may see a 20% decline but I feel certain the Denver metro are is not going to see anything close to a 20% decline - my assessment is that it will stay flat or perhaps see a slight increase during the course of 2008. Will there be individual homes in the Denver market that will decline 20%? Possibly - a foreclosure that has been stripped and trashed due to anger could easily see that sort of decline, but that could happen in any market. There are also Denver neighborhoods that have continued to appreciate during the past 12 months. And, during the past 6 months, I have seen several homes sell in less than 7 that every home, or even most homes? No, but it is happening and our inventory of available home is slowly being reduced. I recently heard that the number of sales in the Denver metro area for December 2007 was almost the same as December 2006 - that tells me that there were still a lot of Buyers out in the market and as long as there are a lot of Buyers, the prices will not be tumbling. You may want to find out how many homes sold in your area for the 4th quarter 2007 versus the 4th quarter 2006.

I cannot speak about home prices in your neighborhood but I would not rely on the county assessed values for determining what I might offer for a particular home - good luck in your search and thanks for your question - I will look forward to seeing responses from other parts of the country.
1 vote Thank Flag Link Thu Jan 10, 2008
We were also surprised by the new tax assessment we had a drop of 100,000.00. Was surprised by how the land had lost value as I was always under the impression that land would always increase in value. I can only imagine how people who are selling and those who thought about selling are looking at a no win situation. If one is selling their house now does that mean you have to lower the price and for those wanting to sell does that mean they can't for the house will be much less than what they paid for it. Alot of people will be looking at the new assessment and seeing no equity in the house they live in so how will that effect people wanting to make inprovements or refinancing. Will this also increase foreclosures that have gone through the roof. The winners will be the first time home buyers and those who's homes are paid in full.
0 votes Thank Flag Link Sun Jan 3, 2010
Hon, you listen to the media too much. The sky isn't falling and "no" I wouldn't accept an offer from you for the assessed value. As you said, that is not the true value. You can try to low ball someone, but buyers like you who do that keep the market stalled. Offer an honest price and be done with it and maybe things will change.
Let me put it in terms you may understand...You deserve to get paid a fair salary for what you do don't you? You wouldn't want your boss to say that they read a survey from Kansas that pays their employees 20% less than he pays you so he's going to cut your pay...
You can't insult people and low-balling offers only keep our economy in the state it is in.
0 votes Thank Flag Link Tue Feb 10, 2009
The housing market before last year, gained over 25% per year in some markets between 2003- 2006 ...including most of Maryland. The tax assessments went up along with the prices paid in that same period of time.
The sellers who are in trouble are those that purhcased at the top... like in 2005 -2006. Now those people are trying to sell for what they paid, or maybe even a little more. Buyers are saying no way am I paying those inflated prices. However, sellers are stuck. They want or have to get what they paid...because many, many of them financed 100% or more. So we are at a stand off. Until those that are upside down in the house (owe more than the house is worth) are gone... asking prices are going to be higher. And things are not going to sell until the prices come down.
So yes, I think home prices (selling price) will come down 20% from the high of 2008 next year.
0 votes Thank Flag Link Fri Jan 2, 2009

I don't think we will see the bottom in 2009 on a national basis (some markets could be okay). There is still a good bit of correction to be made.…

In only about a week, the first held foreclosures will be released. That number is currently estimated at 700,000. All news reports and estimates I have seen forecast 3,200,000 foreclosures in 2009.

It's going to be a very bad year for some people.

0 votes Thank Flag Link Fri Jan 2, 2009
No city or private person wants to declare bankruptcy, but if you're facing insolvency, you have no choice but to seek protection. . I really feel that California maybe heading into trouble in 2009 because of the loss of Tax Revenue. . here in Maryland, we are going to feel the effects but will not be as pronounced.
We just have too many things going our way here. . thanks to our Government's roots here.

Your home's value has declined, no doubt about that. We will see the bottom sometime this year. Any percentage guessed is just an opinion.. your local neighborhood will determine the final outcome.
0 votes Thank Flag Link Thu Jan 1, 2009
The assessed value of a property differs from the market value. Even so, with values sliding many buyers are appealling their present assessed value with the county tax assessor. Most counties will feel this reduction in their tax base over the coming years.
0 votes Thank Flag Link Thu Nov 13, 2008
Now that it is 10 months later, what a change in the marketplace. To re-answer your question, you should not be paying anywhere near the tax assessment value. AND, 20% value reductions is the norm in many markets. 2009 will be a good year for buyers who can qualify, but a bad year for sellers who bought in the last 5 years.
0 votes Thank Flag Link Thu Nov 13, 2008
Tax Assessed Values are not any way to buy or sell. Never have been. That's why we have and and Realtors my man.

Do not set your sales on buying or selling using this method. Assessments are for the County Man!

Good Luck.

Dirk Knudsen
"The Real Estate Doctor"
Web Reference:
0 votes Thank Flag Link Fri Jan 11, 2008
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