That old joke about how your tax assessor views your property may be more true than you realize...
In a recent conversation with City of Madison Assessor's Office I was struck by two things: One, the fact that the office of the City Assessor of Madison does not have unfettered access to the South Central Wisconsin MLS (apparently they they have access to Sold listings but do not have access to Active, Pending and Expired listings). And two (and perhaps more surprising), that in valuing properties for the purpose of determining homeowners' annual property assessments, the City doesn't use certain recent comparable solds. Which recent comps, you might ask? Well, recent comps deemed by the City to have been "sold under duress" as in, you guessed it, short sales and foreclosures.
Huh? I had to ask several times before I was convinced I hadn't misunderstood. How exactly is the City able to determine what constitutes duress? Presumably they weren't involved in all these transactions so how can they draw such conclusions? Although advertised short sales or foreclosures might seem like obvious cases of duress, what about a divorce, an estate or an over-eager buyer? And what about market efficiency? Markets intervene to ensure properties go to the highest bidder. Case in point: two weeks ago I got an accepted offer on a Madison West Side REO and it was one of SIX offers they'd received that day. That's the most competition I've ever in securing an accepted offer! (And all we hear is that the market is slow.) But according to the City, that comp won't be used when it comes time to reassess the homes in that neighborhood. Why, when the market is so competitive would such data be discarded? And at what point does the City stop ignoring that data, when there are no more comps left that don't involved duress?? It's not like there's a lot of speculative selling going on these days. I mean it's no secret these days that if you don't have to sell, you're generally not selling.
While day in and day most Realtors go about their business objectively pricing and selling homes based on recent comparable sales data, why are city administrators valuing properties using incomplete data and subjective thinking? If city workers ignore the lower-priced sales, doesn't that automatically produce higher property assessments despite declining markets?
To try and better understand all things property tax related, I recently added a page to my Madison WI real estate site about Madison property assessments and mill rates based on information from the City Assessor's Office. There's no mention of the above valuation techniques on the city's website but I'm not making up what they told me. And while I disagree with the City's methodology, I recognize that the job of valuing every piece of residential, commercial and income property (including equipment in the case of office buildings) in the city every year is undoubtedly an extremely difficult task, at best. Still, I'm disturbed by these revelations and thus encourage Madison homeowners to take a long, hard look at their property assessments this April 20th. And if you're curious whether you might have reason to challenge your assessment, give me a call or email me. I'd be happy to run the comps (all of them!) and let you know if the data supports a case for your assessment to be lowered.
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Jolenta Averill, Principal
Lake & City Homes Realty