Adjusting Assessed Values In A Volatile Real Estate Market
Since 1991 when real estate prices began to slip in response to a widespread economic recession, the Assessor's office has reduced almost 6,000 properties below their Proposition 13 factored base year values. Because the job of the Assessor is to be fair, not to raise revenue, when market conditions show that owners' properties are no longer worth what they paid for them, we enroll a value that reflects current market conditions. By the same principle, as properties recover their value in a rising market, we must adjust the value back to, or towards, the factored base year value from which it was reduced.
There are two ways that properties come out of a "decline in value" status. The first method is when property sells, thereby creating a new base year value for the buyer. Since July, 1997 we have tracked 232 properties that sold out of a decline-in-value status. For 161 properties the sales price was above the reduced value showing an improving market trend. For 71 properties, the sales price was lower than the already reduced value indicating that the market was continuing to drop. By tracking these sales out of "decline" and sales of properties which have older (hence lower than current market value) Proposition 13 base year values, we get a sense of where real estate may be heading.
If we obtain a clear trend of a recovering market, we can then use the second method to adjust values which would be the reverse of what we did in a declining market i.e. review sales in specific subdivisions and geographic areas to see if restoring values in that neighborhood is justified. While many owners called us to request a review when values were falling, I am unaware of any calls from property owners asking if it is time to raise their values. We are continuing to accept requests for decline-in-value reviews through June 1, 1998. Owners should have purchased since March, 1989, not already have been reduced and have reason to believe through sales in their neighborhood or from an appraisal done for refinancing purposes that their value as of January 1, 1998 is lower than the value shown on their current tax bill.
Unlike annual inflation adjustments to base year values that are limited to two per cent per year, there is no limit as to how rapidly the Assessor restores a property to its factored base year value; just as there was not a limit as to how rapidly we could reduce the value. Given current market trends, if we do decide to adjust some decline-in-value properties upwards, it will probably be a gradual process taking several years to return the property to its Proposition 13 factored base year value. We will send a value notification card in mid-July to all owners whose properties are in a decline-in-value status. To determine if your value has been raised towards your factored base year value, please compare the card to the value on your current 1997-98 tax bill. If you need help interpreting the card, please call Assessor John Tuteur at (707) 253-4459 or by e-mail at email@example.com.