PROPETY TAX NOTICES

Last week Salt Lake County mailed out the 2008 Property Valuation and Tax Change notices to homeowners. Many homeowners may be surprised to discover that in spite of the media attention given to the “slipping” real estate market, the tax valuation for their property has actually increased. In addition, many homeowners, feeling the crunch of our struggling economy, may not be comfortable with increased property tax assessments. Understanding the need for information, and the possible frustrations that may result from not feeling adequately informed, I offer the following regarding property tax valuation statements:

1) Property Valuation is determined by representatives of the County Assessor. These individuals compare sales data and property characteristics to determine a “market value” upon which your property may be taxed. Traditionally Salt Lake County homes have been assessed at nearly 20% below actual sales values. This is good for homeowners how have benefited from lower taxes. Over the past 3 years there has been considerable effort by Salt Lake County to more accurately represent home values, which may explain why homeowners who have been “under-taxed” are still seeing increases in spite of the slowing of the real estate markets.

2) Proposed Property Taxes may not be actually assessed. The valuation notice contains a breakdown of those government entities with taxation rights for your property. It also shows the amounts those entities collected last year and the amounts they may collect this year—both the amounts with no budgetary changes and the amounts if proposed budgets are adopted. Those entities levying taxes are required to hold public meetings to discuss the proposed changes. The information for those meetings is printed on the front of the notice.

3) Valuations can be appealed. The County Board of Equalization will accept appeal requests for those homeowners who feel their home is inaccurately valued. Any homeowner may file for an appeal if he or she feels that their home is not worth the amount being assessed. In order to have your value adjusted, you will need to provide supporting documentation justifying a different value from that which has been assessed. The most common evidence is information from the MLS (obtained by a realtor or appraiser) showing 3-5 comparable property sales. FOR DETAILS ON APPEALS, VISIT www.slcotaxadmin.org

4) YOUR MONTHLY PAYMENT WILL INCREASE, if your taxes go up. The amount you are assessed is divided into 12 installments to be included with your monthly mortgage payment. Your mortgage company will hold this tax amount in escrow until the tax payments are due, at which point the mortgage company will make the tax payment for you. Unfortunately, the amount collected for property tax is based upon last year’s assessment, meaning that if your taxes increase there will not be a sufficient amount in your escrow account. When this happens (and it happens regularly), the mortgage company will pay the balance due and then approach you for the difference. You have 2 options to repay the mortgage company:

a. Pay the difference. The first option is to simply pay the difference. In most cases, the tax increase may only be a few hundred dollars or less, however in the case of a new subdivision or newly remodeled home, this amount may be significant.

b. Include the difference in your monthly payments. The most common solution is to have the difference divided over the next 12 months. By choosing this option you will have your monthly payment increase to cover the amount that the mortgage company has essentially “fronted” for your increased tax assessment.

EITHER WAY, YOUR PAYMENT WILL GO UP. In order to avoid a similar escrow shortfall next year, your mortgage company will increase the amount you pay into your escrow account for the next 12 months, meaning that your total monthly payment will increase. Please note, this is not an increase to your actually mortgage payment, but rather to your escrow account. For example, if you pay $900 in Principal and Interest, with $35 for hazard insurance and $100 for property taxes, your total payment each month is $1,035. If your taxes increase from $1,200/year to $1,300 per year then you will see your total payments increase by $8.33/month ($1,200 divided by 12 is $100, while $1,300 divided by 12 is $108.33).

Every year I get two or three homeowners who call me in December, frustrated that they seem to have an increased monthly payment. And every year I ask these same homeowners if they remember receiving a notice of property valuation and tax change. My experience has taught me that unless we take a moment to review this important document we may find ourselves wondering why our escrow payments have increased.

Again, if you feel that your home is being inaccurately assessed, you may appeal by contacting the Board of Equalization. For more information on the appeals process you can call 801-468-3999 or visit www.slcotaxadmin.org.

As always, if you have further questions about anything mortgage or real estate related, feel free to drop me a line. You can call me at 801-256-0904 or email me at jayhart@cottonwoodmtg.com