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Foreclosure or Short Sale: Reduction in Tax Assessment Not Guaranteed

If you are buying a foreclosed property from a lender or a property that is the subject of a short sale, you might assume that your property tax assessment will be reduced to reflect the purchase price you paid. Surprisingly, there is no guaranty that your assessment will be reduced.

As a general rule, the county property appraisers in Florida disregard purchases from lenders after foreclosures or as part of a short sale in determining property values for real estate tax assessment purposes. Their position is that these are distress sales and are not third party arms length transactions that reflect actual value. They will consider these transactions when and if they see a pattern of declining values in an area or neighborhood. Most county property appraisers send out detailed questionaires after closing to gather information about the transaction including whether it follows a foreclosure or is part of a short sale or if there were other circumstances that should be considered when determining value (i.e. if sales price included personal property).

Posted by Marlyn Wiener on 02/06/2008 09:20 PM

Comments (8)

short sale, foreclosure, tax assessment

8 Comments on Foreclosure or Short Sale: Reduction in Tax Assessment Not Guaranteed

FEB

2008

Hey very good info here, I am going to pass this on to a few that might need this good stuff. Thanks for the post

I was just talking about this today... in a declining market if the property is not selling for even what the TAXABLE value is that's bad... It can be fought however???

Good Point. A property assessment really has very little to do with what "you" paid for the property. It has to do with sales of similar houses that have sold recently in the area.

I was just asking about this very questions both in terms of the assesment and in the valuation of property by the appraisers. It is difficult to determine the "value" of a property with so many foreclosures and short sales --

Thank you for your comments.

I think it is very important that purchasers understand that they may not see a reduction in the real estate tax bill despite the purchase price they paid. Of course, they still can attempt to appeal their assessment - hopefully comparable sales will support their position. I always remind Florida buyers to watch out for the TRIM notice in August - the appeal clock starts ticking then and generally the appeal is due the middle of September. The deadline is strict and you must submit the filing fee with the appeal.

APR

I recently bought a foreclosure for 110k and the tax appraisal came in at 180k. When I complained to the broward county commissioner LP, they touted the comparable sales argument. I feel that the commisioner does not want foreclosed sales included and is not interpreting the law correctly. It has cost me over 60k to bring the house up to par and my accountant has informed me improvements and repairs are not deductable on private prop for my use and tough cookie on the tax loss. I think LP should be held accountable and be voted out of office next term. For some reason nobody ran against herlast time. It's just not fair bed these foreclosure are in terrible condition and many won't sell because of the tax problem and they will sit uninhabited and bring down the neighborhoods with them!

APR

Correction on my last blog. I will have to spend over 60k to bring it up to par. Mea culpa as well on my last blog about her losing her job- I do not wish that on anybody in this economy. It's just that she interpreted the law in favor of short sales and not for forecloses. If foreclosures are taxed on comparable sales and not their actual or arms length sale most other counties in the nation then double kea culpas' to our commisioner. I have not had a chance to research this because I have been too busy cleaning repairing paiinting installing a new lawn on my fully taxed foreclosure. My view is if you buy a sour lemon you should be taxed for what you paid for the sour lemon. The same is true for automobiles and other big ticket items that are auctioned off. My proposal for florida's real estate problems are to give big incentives including zero tax for the first 2 years of buying a foreclosure- then revert to comps. This would cripple the market in the short run, but in the long run neihborhoods will be redeemed. The window is closing for this opportunity because of the climate we live in. The hot rainy season is approaching soon and you know what happens when these 2 meet- Mold! These houses are not being aired out and once you get mold you have a sick house. So what we will have is not only an economic issue but a health issue as well. I knew my degree in economics with a minor in polo sci would come in handy one day. I will now get off my soap box and hope that sound reasoning of the publics long term future health and of our neigborhoods welfare prevails over the political expediency of attempting to salvage the short term real estae tax base. Let us think long term for now. Mea culpa again for I have one more thing to say. If it is unlawful when times are bad for our commissioner to use the actual resale price and not comparables (which are conveniently a year in arears), then it should be unlawful to put a cap on the amount that re taxes can increase from year to year when times are good. Save our foreclosures and our neighborhoods in the process before the window closes. Thank you, sincerely

OCT

Good article on this topic:

http://online.wsj.com/article/SB124104224634570415.html

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