Chicago

[BDMJKMA]

What happens to real estate taxes on property that has sold at lower values? Alomost all homes have seen significant reductions in sales figures and valuse. What happens to the r/e costs in those instances....are they reduced?

That ssems to be a huge issue with homes going for about 500k but whose taxes are 13k-14k a year. Nobody is willing to pay those annual costs anymore. Will there be a reassessment to lower values?

Thanks,

[hdsale]

This is a very thorny issue, I am going through the same struggles with a fixer-upper property that is overassessed by at least 500,000.  I have also spent time dealing with county tax agencies.  Here are my thoughts, based on experience:

1: Taxes will not be reassessed lower unless you ask.  Most counties only have one window in which to appeal tax rates, and that is in the fall when assessment letters are mailed out.  Until that time, the increased tax must be paid.

2: Property taxes assessed by the county are not only subject to the valuation of your property by a county assessor, but also to a divisor based on the cost of providing services (and godawful public pensions) to the county workforce and related county projects.  If the county in which you are looking has not reduced their own expenses, dont expect a huge reduction in property tax.  Even with a reassessed value, an increased divisor will wipe out much of the savings.  Since the county's jobs and pensions are dependent on property tax assessments, it is probably safe to say that the county would rather see real estate prices fall, keep the divisor high, and rake in the same tax revenue that they had built up during the bubble. 

3: If you are looking at a fixer upper in a high-end neighborhood, dont expect any major tax changes since the overall assessed value will be based on comparable properties and sales in the area, and NOT on the interior condition of the residence in question!

4: Get a tax lawyer - a tax attorney with familiarity in your county can be your best asset, and could get the overall tax bill lowered more than yourself.  His/her fees will be more than offset by a year of tax savings.

[Jack2001]

I agree that high taxes are major detriment to the housing market's recovery in the Chicago area especially in Kane and Dupage counties.  Homes that are worth less then 30-40% what they were just a few years ago still reflect taxes from the boom times and impede affordability for folks who may otherwise have been able to afford the home.

I liken it to buying a used Mercedes.  You may be able to afford the car but the maintenance and repair costs are the killer long term because they will just keep going up.

Same with some of the homes I have looked at where I can readily afford the asking price, but then I scroll down and I am disgusted with how high the taxes are which in many cases will be adding another $1,000 or more to my payments and will only go up each year. I just cannot justify that.

As the poster below nicely summed up, county/local municipalities always win out long term as they may grant you a modest reprieve on the valuation $ but the multiple will just keeping up and they will end up netting the same amount long term. 

The house (no pun intended!) always wins in these cases.  When I see a really nice home that is in my budget but the taxes exceed $13K on a $400K property I just sigh and move on to the next one.   

The system is unfair and is keeping housing levels at a much higher # then needed if our tax system were fairer and based on last sales price (which is the only true measure of value - basic economics dictate that the value of a good/service is inherently based on what someone is willing to pay for it in an open market) and add a fixed % increase each year tied to CPI of some other index to ensure a reasonable rate of return to keep up with inflation and rising costs.  

Easy to forecast, easy to explain and justify and forces local government to stay budgeted within their means each year instead of simply printing money each year by raising valuation or multiples to cover shortfalls even in the midst of one of the steepest lose of real estate wealth and value in history.

Good luck getting any politician to take this on and try to reform the system and reign in taxes or spending (just look at our illustrious "governor's" attempt to raise our state income tax by 50% or Crook county's unconscionable tax increase  by their corrupt County President Urkel Stroger).

[NoPainDave]

This is a really interesting question.  One of the jobs of an assessor, when doing his/her mass appraisal of an area, is to determine if that area is in "regression" or "progression".  Like the terms sound, if the area is found to be in regression, values on the books should generally go down.  In the reverse situation, when an area is said to be in progression, the assessor needs to increase values.

I think it's pretty fair to say that pretty much the whole country is in a state of regression.  However, if you take a look at your home's market value according to the Cook County Assessor's Office, 99 times out of 100, your current year's market value has actually gone UP.

Without going into the boring details, a change was made to the assessment percentages of all properties in Cook County for the current tax year.  The change came about as a result of the so-called "10/25 Ordinance."  You can download a copy of the ordinance summary from my website by highlighting the URL at the bottom of this post, copying it into your browser, and going to Resources > Important Links.

The change that the ordinance calls for, believe it or not, involved the LOWERING of the percentages used to calculcate a property's individual assessment (for instance, commercial properties are now assessed at 25% of market value instead of 38%).

Sounds good, except for the fact that when the Assessor applied the new law, he chose to simultaneously INCREASE market values throughout the entire county.  This has resulted in, essentially, a reassessment of the whole county in one year.  What's crazy is that the northern suburbs will be officially reassessed as of the next year, resulting in back-to-back reassessments.  Suburbs to the south and west of Chicago will be reassessed the following year, and Chicago itself the year after that.

The answer to this problem?  Appeal, appeal, appeal!  Regardless of what the Assessor decides to do to your property's assessment, you have the right to appeal it.  In fact, they expect you to do so.  That's why it's called a "proposed assessment" until all appeals have been heard.

I hope this helps answer your question, and good luck!

Message Edited by NoPainDave on 03-16-2010 06:40 PM