Sacramento Appraisal Blog

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What to do when a “Notice of Hearing” comes in the mail regarding your property taxes

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So you filed your property taxes last year and have been waiting for an answer. Now what? Today I want to walk you through what happens after you turn in an appeal. This is good to know for home owners as well as real estate professionals.

After Filing an Appeal: Once you dispute your property taxes, if you provide good support for your value, chances are the Assessor may weigh your situation carefully and either agree with you or offer you a value that is somewhat close to your proposed value. But it doesn’t always play out like that.

notice of hearing from Assessor - Sacramento Appraisal Blog

The truth is even if you provide stellar data and give the best written presentation possible when filing an appeal, you can still get a “Notice of Hearing” form which sets up a date for you or your agent to appear at an appeals hearing. This hearing is generally the last opportunity to make your case for a lower assessed value.

Does a “Notice of Hearing” mean your value has been rejected? Not at all. Keep in mind sometimes these notices in Sacramento County are mailed automatically if the Assessor’s appraiser has yet to get to your file before a certain date. However, it could also be due to the appraiser not agreeing with your value. You’ll never know until you contact the Assessor (I do this for my clients).

Tax Change Withdrawal Form - Sacramento Appraisal Blog

A Real Life Communication Example: Let’s consider the example above. A home owner contacted me to help provide her with a valuation during the process of her tax appeal. I put together a very solid report to clearly illustrate market value. Even the graphs in my report made it incredibly obvious that her property was in no way worth $251,000. However, I still received a “Notice of  Hearing” to make an appearance at an Appeals Hearing. This notice was in no way due to my work, but rather the Assessor’s appraiser was not able to view the property’s file before the “Notice of Hearing” mailer deadline. This means I had to contact the Assessor’s appraiser to talk about the property once the notice came in the mail. Thankfully after reaching the appraiser it was a smooth process, and the appraiser ended up reducing the value by $121,000 (about $1,500 in savings). In light of the agreed upon verbal reduction, I then received the “Tax Withdrawal Form” from the Assessor and then faxed it to their office to basically resolve the appeal by agreeing to the new value listed. It would have been ideal to get the Tax Withdrawal Form in the first place since my original report was already conclusive, but this is how it works. Sometimes there are a couple of extra hoops of communication to jump through. This case was actually easy, but others have taken much longer.

In short, this is a small example, but it helps illustrate what it’s like to communicate regarding property taxes. Sometimes it can be smooth, but in many cases it’s a huge pain there are inconveniences that cause minor delays (which add up over time).

Property Tax Advice (after you file an appeal):

  1. It takes time: Be patient with the process as it can take a while to work it out.
  2. Strategic use of manners: Be diplomatic with the Assessor’s office. Avoid name-calling or rudeness.
  3. Negotiate a new value by calling: If you get a Notice of Hearing letter, contact the appraiser listed on the form to try to work out a value before the hearing takes place. Just because there is a scheduled hearing does not mean the hearing has to actually happen. It saves you and the Assessor time if you can come to an agreement before the hearing.
  4. Get good support: If you don’t have any support for your value or research, you should hire someone to help you. For instance, I am talking with a property owner right now about his hearing in 40 days. He has zero support for his value when he filed last year, so he really needs something to give to the Assessor (or have me do it for him).
  5. Be ready when making the call: Keep in mind sometimes a discussion about the value of your property ensues on the phone when calling the appraiser after getting a “Notice of Hearing.” The conversation can be critical for the Assessor’s interpretation of the market, so have your research ready before making the phone call. This is where really knowing the comps and neighborhood market comes in handy.

I hope this was helpful and you now have a bit more insight on what might happen after you file your property taxes. Let me know if you have any questions.

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

Where do you find comps when there are none?

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Wouldn’t it be nice to have model match sales when appraising or listing a house for sale? Is sure would make it so much easier to come up with a value, right? That would be ideal, but it just doesn’t play out that way sometimes. On occasion I get lucky by having ample sales to choose from, but other times it’s slim pickings. This begs the question, how do appraisers value property when there are no recent comps? Isn’t that a problem?

no comps in the neighborhood - sacramento appraisal blog

Here is a window into my methodology for what I do when a property is unique or there are no recent sales in the neighborhood:

A) Immediate Neighborhood: I start by looking at older sales within the immediate neighborhood over the past several years to help gauge how the market has historically perceived the neighborhood. Most lenders want appraisers to use sales within the past 90 days, but that’s not always possible. There is nothing wrong with using older sales in an appraisal report if need be (along with some newer ones too), but it’s also important to make adjustments based on how the market has changed over time. If there has been an increase or decrease in value, for instance, then I would make an adjustment in my report for the uptick or decline. Let me clarify that I tend to not use sales over a year old in most cases in my appraisal reports, but I definitely research sales much older for reference. By the way, FHA does not allow comps to be older than one year.

B) Competitive Neighborhoods: Next I look at competitive neighborhoods to find some recent sales to help illustrate the current market. The key of course is knowing which neighborhoods are competitive. Making improper comparisons can really boost or bust value. This is why caution should be exercised when choosing “comps” from outside the neighborhood. After all it’s a red flag if all sales in the immediate neighborhood are ignored by the appraiser – unless of course there is a good reason why they are not relevant. Frankly, appraisers should use the best available comparable sales – whether they are next door or much further away. If there is a value difference between two neighborhoods, an appraiser can make an adjustment for that difference too. By the way, lenders tend to want appraisers to stay within a “one-mile radius“, but appraisers are definitely not bound to that rule despite many in the real estate industry thinking that is the case.

C) Current Listings: Thirdly, I look more deeply at current listings in the immediate neighborhood. Sometimes these can help me glean insight into how the market is seeing the neighborhood. This is really where talking with knowledgeable Realtors is paramount. Sometimes withdrawn listings can also provide insight into the market – particularly if they were pulled from MLS and then sold privately. Listings are definitely supplementary market data and inferior to sales, but they are still good for research. It’s important to remember too that just because a house is priced at a certain level does not mean it will sell at that price.

D) Other Resources: I talk with appraiser colleagues through the REAA (a professional organization I belong to), create historical graphs and consider other metrics such as price per square foot, rental value and the Cost Approach if relevant. In some cases, there really aren’t any perfect comparable sales to choose from, so the appraiser simply has to work with what is available. This might make for an ugly-looking appraisal, but it is what it is. Again, it would be nice to have several model match sales, but that’s just not how it happens in many cases.

Questions: Any stories or insight to add? Realtors, how do you come up with prices for your listings when data is sparce? I’d love to hear from you in the comments below.

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Donating real estate for a tax deduction & things to know about IRS appraisals

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Did you know you can get a tax deduction when you donate real estate as a charitable contribution? I do IRS appraisals regularly, and the most recent example of this type of appraisal was when a property owner donated a rental to his alma mater. Since he needed to establish fair market value before filing his taxes, he hired me to help him out.

IRS form 8283 - Sacramento Appraisal Blog

Here are a few things to keep in mind regarding your donation and working with an appraiser during such a situation:

  1. If you claim a deduction more than $500 for a non-cash charitable deduction, the IRS requires Form 8283 to be filled out by the property owner (or partnership or corporation).
  2. Form 8283 should be filled out and filed with your tax return for the year you contribute the property and first claim a deduction.
  3. The IRS does require the property owner to show the fair market value (FMV) of the property, so that’s why an appraiser is involved in the process. The IRS defines fair market value as “the price a willing, knowledgeable buyer would pay a willing, knowledgeable seller when neither has to buy or sell.”
  4. The appraisal will be based on the date you donated your property (not the date acquired by the donor, which could be different). Usually appraisals like this have a retrospective value, which means the appraiser will provide a value based on a date in the past (contribution date).
  5. Since Form 8283 needs to be signed by an appraiser as well as the donee, it may be prudent to start the process as soon as you can so you are not scrambling to get an appraisal the day before your taxes are due.
  6. It is very important for the appraiser to be familiar with IRS appraisals. If you really want to read about IRS appraiser qualifications, click here. In general, here are a few starter questions to ask the appraiser: How long have you been appraising? Are you currently licensed and insured in the State of California? Tell me about your experience appraising this type of property as well as your experience in the subject property’s neighborhood. Are you familiar with IRS appraisal standards?
  7. Appraisers are required to be a neutral party and must provide a fair market value without showing favor to the donor (or any other party). There are serious consequences for inflated appraisals.
  8. The appraiser signs the following declaration on Form 8283, which underscores how important it is to hire an appraiser who is experienced, knows how to do IRS appraisals and knows the real estate market too.

Declaration of Appraiser I declare that I am not the donor, the donee, a party to the transaction in which the donor acquired the property, employed by, or related to any of the foregoing persons, or married to any person who is related to any of the foregoing persons. And, if regularly used by the donor, donee, or party to the transaction, I performed the majority of my appraisals during my tax year for other persons.

Also, I declare that I perform appraisals on a regular basis; and that because of my qualifications as described in the appraisal, I am qualified to make appraisals of the type of property being valued. I certify that the appraisal fees were not based on a percentage of the appraised property value. Furthermore, I understand that a false or fraudulent overstatement of the property value as described in the qualified appraisal or this Form 8283 may subject me to the penalty under section 6701(a) (aiding and abetting the understatement of tax liability). In addition, I understand that I may be subject to a penalty under section 6695A if I know, or reasonably should know, that my appraisal is to be used in connection with a return or claim for refund and a substantial or gross valuation misstatement results from my appraisal. I affirm that I have not been barred from presenting evidence or testimony by the Office of Professional Responsibility.

I hope this was helpful. As an FYI, you can read more about Form 8283 here or DOWNLOAD Form 8283 (pdf).

Question: If you could donate a property to any charity or organization, who would you choose?

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

The role of an appraiser during a divorce

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I came across a fantastic graphic from the Wall Street Journal that explains what an appraiser does during the process of a divorce. In a nutshell, here is how the process goes (though the graphic does not mention an appraiser may also need to testify in court). Let me know if you have any questions or specific situations you need to discuss about your property.

sacramento-home-appraiser-divorce-appraisal-process-via-wsj

If you have any questions or Sacramento home appraisal or property tax appeal needs, let’s connect by phone 916-595-3735, email, Twitter, subscribe to posts by email (or RSS) or “like” my page on Facebook

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