For many of us here in the valley and for a multitude of reasons, our proverbial cup really does runneth over. Loosely translated, the phrase that originates from the Bible and the Torah means “to have more than enough for my needs.” Unfortunately, there are consequences for everything. At the end of the day, Newton’s third law applies: For every action, there is an equal and opposite reaction.
As Pitkin, Eagle and Garfield county homeowners head to their mailboxes this week, they’re sure to get a reminder of cause and effect and just what it means to have too much of a good thing. Assessors across the state have completed their biannual examinations of property values (as they see them), and those fresh evaluations are now being delivered. Those who own commercial property or vacant lots will also not be spared, as all indications are the change in assessed value for most everyone in the area will be eye-popping from just two short years ago.
Property taxes are calculated by taking the assessed value of your home and multiplying it by the tax rate that has been determined by your local government. Property taxes are used to finance local schools, police and other municipal infrastructure and services. And like all taxes, they are a fact of life and yes, escapable only by death.
It’s no secret that for the past two years, from Glenwood to Aspen, the real estate market has not only recovered but is the busiest we’ve seen since before the Great Recession. For most, that means higher assessed value and higher taxes. In Eagle County, for example, the median increase is about 10% for residential property, according to Mark Chapin, Eagle County assessor. Some neighborhoods, like Blue Lake, are coming in higher than that; others might be less, but overall, across the board, assessments are up.
To arrive at their determination, assessors will tell you they look at what similar properties are selling for under current market conditions, how much the replacement costs for the property would be, the maintenance costs for the property owner, any improvements that were completed, any income you might be making from the property and how much interest would be charged to purchase or construct a property comparable to yours.
But clearly that’s a tremendous amount of information to collect for each home, building or lot in a given county. Assessors don’t interview owners and rarely enter the premises. And like any government agency, these offices are vastly understaffed, the result being a mostly data-driven process and therefore subject to interpretation.
What’s important to remember here are three metrics: assessed value, appraised value and market value. Assessed value is what we have been discussing here — what county officials determine your home to be worth which in turn dictates your effective tax rate. Appraised value is what lenders use and usually differs from assessments. And finally there is market value — the number your home and homes like yours near you have and are selling for.
Property taxes are paid in arrears, which means the homeowner pays for the billing period leading up to the due date. This can create problems as it did in the years after the recession, as assessed values leading up to the crash were inflated, and payable for the next two years at the higher rate, even as home values plummeted.
The good news is that if your evaluation comes in high, there is an option to appeal. This year that window remains open until June 3. You’ll need to write a letter, provide comps and effectively argue your home is not worth what the assessor thinks it is. One argument I’ve used for both myself and my clients is this: Of the comparable homes that sold, what were the finish levels and amenities inside? Was there a recent remodel? Are you located next to a busy road?
If successfully proven, I’ve seen $50,000 to $80,000 reductions on homes first assessed in the million-dollar range. Another option would be if you recently had your property appraised for a refinance or for tax purposes. If for some reason that determination came in less than your recent appraisal, that can also be an effective weapon.
By providing this advice, I am certainly not minimizing or dismissing the importance of local taxes nor payment of them. These kind of taxes provide critical support to emergency services, education and other municipal services. But at the same time, the system isn’t perfect and does have its checks and balances. It’s up to you to decide to use them.
Scott Bayens (GRI, ABR, CNE) is a Realtor with Aspen Snowmass Sotheby’s International Realty with 15 years of experience with buyers, sellers and investors. He can be reached at scott.bayens@sir.com or 970-948-2265.