The new 2010 real estate assessments are out and I thought it might be of interest to compare these new assessed values to the prices for which properties are actually selling.

Below are the 12 properties in the City of Harrisonburg shown as sold in the HRAR MLS between January 1, 2010 and February 14, 2010.

	Address	Sales Price	Assessment	Sales Price / Assessment
	1195 S. Dogwood Dr	$325,000	$324,800	100.1%
	2121 Scarlet Oak Ct	$246,000	$233,400	105.4%
	475 Hartman Dr	$151,000	$176,300	85.6%
	509 Pointe Dr	$150,000	$172,900	86.7%
	1406 Founders Way	$149,000	$184,700	80.7%
	470 W Wolfe St	$204,500	$202,100	101.2%
	333 West Ave	$230,500	$235,500	97.9%
	460 Ohio Ave	$230,000	$233,500	98.5%
	1329 C South Main St	$109,000	$123,500	88.2%
	755 Northfield Ct	$107,500	$155,100	69.3%
	151 Logan Ln	$77,500	$90,200	85.9%
	2560 Ramblewood Rd	$185,000	$224,400	82.4%

As you can see, some properties sold above AND some sold below assessed value.  On average, these 12 properties sold for 90% of assessment, and the median ratio was 87%.  If we assume that assessed values are a VERY GOOD INDICATOR of market value, this analysis could mean that:

• City assessments could be "too high" --- of course this is hard to really gauge, since the assessments aren't based on today's values, but rather on values from the past year (or so) leading up to the re-assessment.
• Or....the only properties that are actually selling right now (or most of the properties that are actually selling right now) might be the properties that are priced very aggressively (low), or properties where owners end up negotiating down quite a bit.

Several questions that rise out of this analysis would then include:

• Should SELLERS only expect 87% to 90% of their assessed value in a sales price?
• Should BUYERS only expect to pay 87% to 90% of an assessed value as a sales price?

The answer to both questions is "not necessarily" --- I don't believe that assessed values are necessarily within a very small margin of market value --- I think that there is some variation.  Thus, the variation in the ratio of sales price to assessed value is normal, and will always exist.

If I didn't walk in too many circles there, tell me what you think!

The City of Harrisonburg has reassessed all real property as they do each year, and it appears that there wasn't a significant (overall) shift in assessments.  Of the 12,000 parcels of real estate, nearly 8,700 had a change in their assessed value, with 3,100 of the values decreasing and roughly 5,600 increasing.  That is to say.....

• 26% of city properties decreased in assessed value
• 27% of city properties saw no change in assessed value
• 47% of city properties increased in assessed value

The median assessed value increased by $400, which equates to an annual increase of $2.36 in taxes.  Yes folks, that's a 20-cent increase per month.

If you don't believe your assessment is accurate, you can appeal the assessment starting the week of December 7th.  Or you can express your frustration (or delight) in the comment section below.

The bigger (MUCH BIGGER) news (or controversy) coming down the pike is the Rockingham County real estate reassessment coming in early 2010.  These assessed values haven't adjusted in four years, so many people will likely see big increases in their tax bills despite feeling that they have seen no gain (or a loss) in value over the most recent few years.  Stay tuned!

Rockingham County is currently in the process of reassessing all real estate in the County.  When the new assessed values are sent to property owners, there is bound to be some distress and consternation, as assessed values will increase (in many cases), yet homeowners know that home values have been decreasing over the past few years.

First, have home values decreased over the past few years?

• The median sales price in 2007 was $214,250
• The median sales price in 2008 was $204,000
  
• The median sales price in 2009 (thus far) is $195,975

This shows a 4.8% decline between 2007 and 2008, and a total 8.5% decline between 2007 and 2009. 

So, why will many assessed values going up? 

• The new assessments (effective for 2010 - 2013) will be based on real estate transfers during 2008-2009, when the median sales price was/is $200,000.
  
• The old assessments (effective for 2006 - 2009) were based on real estate transfers during 2004-2005, when the median sales price was $175,000.

As you can see, many homeowners will likely be confused and concerned.  They'll think it just isn't fair that assessed values are increasing when they know real estate values are decreasing.  It will likely be little consolation that real estate values actually have increased in the full time span since the last reassessment.

As a point of interest, property owners should actually be retroactively grateful that they are (only just) now seeing this increase in their assessed values.  Here is the tax burden over five years for the median value of homes, given that reassessments only occur every four years:

• 2006 (based on '04/'05 sales) $175,000 = $1,050 tax bill
• 2007 (based on '04/'05 sales) $175,000 = $1,050 tax bill
  
• 2008 (based on '04/'05 sales) $175,000 = $1,050 tax bill
  
• 2009 (based on '04/'05 sales) $175,000 = $1,050 tax bill
  
• 2010 (based on '08/'09 sales) $200,000 = $1,200 tax bill

As you can see, the tax bill stays the same for four years, leading to a total tax liability of $5,400 over five years.  In contrast, here's what the tax bill would look like if properties were reassessed each year:

• 2006 (based on '04/'05 sales) $175,000 = $1,050 tax bill
  
• 2007 (based on '05/'06 sales) $199,975 = $1,200 tax bill
  
• 2008 (based on '06/'07 sales) $215,000 = $1,290 tax bill
  
• 2009 (based on '07/'08 sales) $210,000 = $1,260 tax bill
  
• 2010 (based on '08/'09 sales) $200,000 = $1,200 tax bill

In this scenario, the total tax liability would have been $6,000 over the same five year time period, $600 higher than reality.

I showed four homes in the City of Harrisonburg this afternoon to one of my buyer clients, and as my clients and I viewed the homes we sensed a very strange relationship between asking prices and our perception of their value.  That is to say that we didn't sense much of a correlation between what the owners were asking for the houses and what we thought they were worth.

To explore the relationship (somewhat) objectively, I thought I'd compare the asking prices to assessed values.  But first, here is how sale prices and assessed values compare for the last three sales in the City of Harrisonburg between $240k and $260k.

Sold properties are selling for 97% of assessed value --- based on an unreasonably small sample size of three properties:

• Property #1 sold for $244,500 and is assessed for $240,300 --- 102% of assessed value.
• Property #2 sold for $252,000 and is assessed for $259,400 --- 97% of assessed value.
• Property #3 sold for $250,000 and is assessed for $273,800 --- 91% of assessed value.

So.....let's take a look at the four properties we viewed today:

• Property #1 is listed at $239,000 and assessed at only $213,900.  The list price is 112% of the assessed value, which was evident when we viewed the home.  We thought the asking price was pushing the envelope.  If listed for the average of 97% of assessed value, at $207,483 it would have been MUCH more interesting!
  
• Property #2 is listed at $249,900 and assessed at $228,400.  The list price is 109% of the assessed value.  Again, we were scratching our heads trying to figure out why it was priced as high as it was.  Again, if it had been listed at 97% of assessed value ($221,548) it would have been MUCH more interesting!
• Property #3 is listed at $249,950 and assessed at $266,900.  The list price is 94% of the assessed value, and this was CLEARLY evident --- the property seemed to be a good value even at the asking price.
• Property #4 is listed at $289,000 and assessed at $235,100.  The list price is a whopping 123% of the assessed value.  As you might expect, the asking price on this house was the most shocking to us, which makes sense when now looking at the assessed value.

BOTTOM LINE -- the assessment for your property shouldn't be the primary OR only guide for pricing your home . . . BUT if you are more than 3% or 4% above the assessed value, you might want to reconsider your pricing strategy!

From the Daily News Record we learn that with the latest City assessment, the 173 parcels in the downtown business district had a median 25.22 percent increase in assessed value.

That's great news for downtown property owners, as the value of their properties have increased --- but not so great news for those same owners from a property tax perspective. 

And from a larger perspective, I think it's terrific news, as it shows that downtown Harrisonburg is continuing to be a great place to live, work, eat, shop, play and more.

Great coverage today by the Daily News Record of the new assessments for real estate in the City of Harrisonburg.  A few interesting notes:

• The median residential property values went up 2-3% this year in Harrisonburg.
• One third of Harrisonburg's 12,000 properties did not see a change in value.
• A 3% increase on the median sales price of a home in Harrisonburg would only equate to a $41 annual increase in taxes.
• Comments have already begun on the DNR site, several from property owners who are in doubt of the value increases the City of Harrisonburg attributes to their homes.

Here is some related reading:

• Assessed Values - What and Where
• Appealing Your (City) Property Assessment

So -- what say you? 

Did your assessment go up or down?  Do you think your new assessed value is accurate?

Currently, property owners in the City of Harrisonburg are taxed at a rate of $0.59 per $100 of assessed value. In other words, a $225,000 home is a tax liability of $1,328 per year.

Thus, since real estate values almost always increase in Virginia, unless the City lowers its tax rate, taxes will also almost always increase!

And so, this year (2008), the City of Harrisonburg finds itself going through the process of notifying Harrisonburg property owners that they are proposing a real property tax increase. No, they aren't increasing the tax rate ($0.59), but the effective taxes will increase because of increased property values.

Here are the details of the changes in the City:

• Property Assessments increased by 6.45% between 2007 and 2008.
• To keep the sum of the tax liability for all property owners the same as last year, the City would have to lower the tax rate from $0.59 per $100 of assessed value to $0.5543 per $100 of assessed value.
  
• Thus, the effective rate increase is the difference of these two tax rates, an increase of $0.0357 per $100 of assessed value, which is a 6.4% tax increase.
  

Certainly, some property owners will see more (or less) of an increase in their tax liability -- but as a whole, by keeping the tax rate at $0.59, the City is increasing taxes by 6.4%.

Do you have questions or opinions about this tax increase? You are welcome to voice them here on my blog, in the comment section. Additionally, a public hearing will take place on May 13, 2008 at 7:00 PM in the Harrisonburg Council Chambers located at 409 South Main Street, Harrisonburg, Virginia.

I was recently asked about the rate at which commercial properties are appreciating (growing in value) in downtown Harrisonburg. 



Getting to an answer took quite a bit of data collection and analysis, but here's what I have compiled . . .

Methodology
Properties meeting the criteria below were considered in this study, which resulted in a data set of 145 properties:

• B-1 zoning (downtown central business district)
• Current commercial use categorization
• Property improvements of $50,000 or greater

Point-to-point Sales Analysis
A point-to-point sales analysis was completed of all properties for which two historical sales prices and dates were available, where the sale dates were at least two years apart.  This resulted in a data set of 8 properties:

• Appreciation per year ranged from 7% to 26%.
• Average appreciation per year was 16%.

Five-Year Comparison of Assessed Values
The 2003 assessed value and 2008 assessed value were compared for each of the 145 properties.

• Appreciation per year ranged from 1% to 56%.
• Average appreciation per year was 12%.

NOTE: The 12% per year increase in assessed values includes a number of properties purchased and rehabbed by investors (which, in some cases, caused major increases in assessed values).  So, added value by investors is part of the 12% (not just perceived market appreciation by the assessor).

The assessed value of a property is the value assigned to the property by the local assessor's office, for the purpose of determining how much you will pay in taxes.  Harrisonburg has a great "Understanding Assessments" guide on the Commissioner of the Revenue section of their web site.

How to determine the assessed value of a property:

For Harrisonburg, visit the new Real Estate Information System to view assessed values for properties, and lots of other property information.

For Rockingham County, visit their GIS web site, where you can search for a property, and obtain its assessed value.

Additionally, if you have trouble with either of these systems, feel free to e-mail me (scott@cbfunkhouser.com) --- I look up assessed values quite frequently, through both of the systems above, and through the MLS.  I'd be happy to look up a property for you and e-mail you back with the assessed value. 

Real World Assessments

Let's take a look at a few real world assessments compared to recent sale prices to see how they compare, starting with the three real estate closings from the past few weeks in our MLS for Harrisonburg . . .

1064 Meadowlark Drive (closed 1/2/2008) Sale Price = $155,000 Assessed Value = $149,500 (96.5%) 1159 Westmoreland Drive (closed 12/27/2007) Sale Price = $265,000 Assessed Value = $204,300 (77.1%) 80 Maplehurst Avenue (closed 12/27/2007) Sale Price = $312,500 Assessed Value = $229,600 (73.5%)

1090 Oakdale Court (closed 1/3/2008) Sale Price = $167,000 Assessed Value = $144,000 (86.2%) 4765 Lawyer Road (closed 12/28/2007) Sale Price = $270,000 Assessed Value = $180,900 (67.0%) 126 Wilson Way, Massanutten (closed 12/28/2007) Sales Price = $325,000 Assessed Value = $299,000 (92.0%)

It becomes clear that there is not a magical percentage that can be used to determine the market value of your home based on assessed values. 

Finally, here's one example of a house (that I am marketing) that is for sale at a price below the appraised value:

6210 Dotts Lane, Penn Laird (click here for details)
Asking Price = $319,000
Assessed Value = $333,200
With amazing views, a large lot, a private neighborhood, schools in close proximity, superior construction quality, and a price below appraised value, it is a great opportunity!

A reader posed the question of how or why might you appeal the assessed value assigned to your property by the City of Harrisonburg.  Below is an overview of that subject, based mostly on information I gleaned from a conversation with Nancy Lawson at the City of Harrisonburg's Commissioner of the Revenue office. 

When determining new assessed values, the City of Harrisonburg always tries to get pretty close to the market value of the property --- but they are almost always under market value with their assessments.  ("Market value" being defined as the amount you could obtain if you sold it.)  They are often under market value because they use sales data from July 1 to June 30 --- and they release the new assessed values in November.  So they are basing the new values on data that is 4 to 16 months old.  However, regardless of the data being used, it is possible that the city could have assessed your property at too high of a value --- and there is an opportunity for recourse.

The first step of the appeal process involves meeting with someone at the Commissioner of the Revenue's office about how they came to your assessed value --- this is called the informal review.  There is a "worksheet" on file for your property showing the calculations they used to come to your assessed value.  They can also share the information on comparable properties in your neighborhood, which they use to determine assessed value. 

If, after the informal review, you think they have assessed your property at too high of a value, you can file a formal appeal using this form.

Click here for more assessment information from the City of Harrisonburg

This all applies to the City of Harrisonburg.  The process and details for properties in Rockingham County (or in any other city, town or county) are a bit different.  If you live outside of the City of Harrisonburg and you're having trouble finding parallel information for another locality, let me know --- I'd be glad to help you research it.

"The city's annual reassessment shows a preliminary average increase in property values of 6 percent, according to Commissioner of the Revenue June Hosaflook."  Source: Daily News Record, November 27, 2007

Interestingly, one of my clients e-mailed me earlier this week indicating that his assessed value had gone down approximately $2,000 from 2006 to 2007.  Great news relative to his tax burden --- questionable news relative to the one-year change in the value of his house.

Also this week, on WSVA's Home Show, we had a call from another city resident whose assessment decreased.

According to the City, some neighborhoods went up dramatically in assessed value, and some went down year to year.  The common thread in almost all of the neighborhoods was that the land assessment stayed constant or went up --- land almost always appreciates or holds its value.