Could A Lowered Assessed Value Hurt You When You Sell Your Home?

Should you appeal your property tax assessment or not? One question people might have before seeking to reduce their property tax assessment is simple:  Will a buyer offer less to purchase a property if I win my appeal and the assessed value is lowered?  While the question might be simple, the answer is not.

While it is impossible to say for certain that a lower assessment would not affect a price offered, I believe in most cases that is unlikely.  While a few buyers may think they should offer X% of assessed value, such buyers are rare. In fact, while I have sometimes had buyers ask about the annual tax payments over the years, I do not recall any potential buyer ever asking about the assessed value. 

The concern here would be similar to the house having a low “Zestimate” on Zillow’s website.  Again, I have never had any potential buyer comment on a low “Zestimate”, or have a buyer say their lower offer was based on Zillow’s opinion of market value. Most people realize that neither the tax assessment value nor Zillow’s value are anywhere close to being accurate.

A Lower Assessed Value Is A Good Thing

For most buyers what drives the offer price is the price at which other similar listings sell, and the availability of other similar properties at the time.  To the extent buyers look at tax assessment data, a lower assessed value would correlate to a lower annual tax bill, which would be a good thing for the buyer.  Many buyers will calculate their total monthly payment prior to making an offer, which includes the tax payments. Therefore the lower tax payment amount is more likely to increase the offer price, not lower it.  In my opinion, buyers who calculate their total monthly payments are far more common than buyers that base their offers on the tax assessed value or the Zestimate for the property. Any risk of a reduced assessment decreasing a sales price is probably more than offset by the possibility that it will increase the sales price.

Assessment Date vs Tax Year

A more important factor to consider is that a reduction in assessment is not permanent.  The January 1st 2009 assessment notice you received in the summer of 2009 is used to determine the tax payments made in 2010.  If you are planning on selling within the next year, then contesting your assessment might benefit your buyer more than you.  By way of example, let’s say you appeal your January 1st, 2009 assessment, and receive a $1,000 reduction in your actual tax bill. If you sell your property on June 30, 2010 you will have only saved $500 because the rest of the property tax is due later in the year.  Again, you should note that the buyer might pay more for your home because of that savings.  At 6% interest, a $500 reduction in tax could cause a buyer that is calculating their total payment to pay an additional $8,300 in purchase price!  That, however, is speculative; the only benefit you could count on for certain would be saving the $500.

To summarize, while it is possible that a lower assessment would result in a lower offer from a buyer, I consider that possibility relatively unlikely.  It is more likely that a lower tax payment would result in a higher offer.  In most cases, however, the assessed valuation will just be ignored completely. Buyers should make their offers based on the sales of other similar properties, and the availability of other properties nearby.

Guest Blog Post By: Kary L. Krismer, Keller Williams Realty
krismer@kw.com

After 20 years of practicing law in Seattle, and the graduation of his daughter from college, Kary L. Krismer joined his wife in the real estate business as a licensed real estate agent with Keller Williams SE Sound. There Kary is part of a full service four agent team that specializes in single-family-residential properties, primarily in King and Snohomish Counties.

Kary intends to focus his blogging efforts on legal, economic and technology issues that are relevant to both agents and consumers alike. Never blindly accepting the common wisdom, Kary will address topics in ways that will explain the reasons why things happen that many never consider, and might even find difficult to accept.

Kary is a lifetime Washington resident. Before becoming licensed, Kary earned degrees in both accounting and law from the University of Washington. His passions include technology, economics, and most of all cats.