“Estimated Market Value” is an estimate of how much your home is worth that government then uses to calculate how much of the overall property taxes you have to pay.
To calculate your estimated market value, the City Assessor looks at how much houses like yours sold. They look at characteristics like house size, number of bedrooms, number of bathrooms, garage, etc and then compare your house to the sales price of similar ones.
However, when they do this calculation, they leave out lender-mediated sales, i.e. bank sales. These are situations where people have defaulted on their mortgages and banks are now selling the homes to pay off the mortgages.
In normal times, this is no big deal because they are such a small portion of the total sales. But now, they are a substantial number of the sales that are occurring. For example, in Longfellow neighborhood, my neighborhood in Minneapolis, bank sales made up 41% of the total sales. The percentage varies around the City, with 65% of North’s sales being bank-mediated, with only 17% of Southwest’s sales being bank-mediated.
See your neighborhood’s details here: http://www.mplsrealtor.com/downloads/market/Lender-Mediated/Main.htm
The reason that this is important is that bank sales are typically made at much lower prices than regular sales. In Longfellow, the average sales price for homes sold the traditional way was $200,000. Bank sales however, averaged $118,000. The 40% of home sales that averaged $118,000 are left out of the calculations for estimated market value, arguably overstating the market value of a large number of homes.
This is through state policy. But it seems to me that for a buyer, there is no difference between one method of sale and other, other than I can buy a home much much cheaper one way than another. It seems to me that state policy should be changed to include lender-mediated sales since today they make up so much of the market in some locations. The policy benefit to this (besides fairness) would be to provide tax relief in areas that are hit hardest by the home value meltdown. This would also provide a benefit not just to persons who made bad investments (for whatever reason) but would also recognize persons who did the right thing but have been impacted by bad decisions by persons around them. It could also help people who are on the margin to stay in their homes.
In full disclosure, the Assessor’s Office doesn’t like this idea because typically lender-mediated sales are of properties that have some problems. In Minnesota, banks are required to give homeowners six months to “reclaim” their homes after foreclosure, a holdover from the Great Depression. The problem with this policy is that in those six months, bad things often happen. Copper and architectural features gets stripped. Squatters move in. Vandals visit. So sometimes, these lower sales are warranted. It would be an extra burden on the assessors to inspect these properties to see if they had substantial damage but overall it would be fairer if they were included in the valuations.
March 17, 2009 at 4:10 am |
Carol,
I agree with you that bank medicated houses should be included in the calculations for market value for tax evaluation. Neighborhoods are impacted by these sales. Neighbors who need to sell their homes must reduce their sale prices yet the taxes remain at the higher assessed levels, another deterant for buyers, and another difficulty for sellers who must sell. There are many owners who are just marginally staying in those homes, and need some kind of relief to keep them there…and to uphold neighborhood value. The more properties which go into the forclosure, the worse our neighborhoods become. Let’s give the people who have worked to pay their mortgages and taxes and keep up the community a break, and, instead, find a way to make the banks more responsible for the homes which they are in such a hurry to reclaim. They need to secure and monitor those houses so the values of both the houses and neighborhoods are protected. It would be in their own best interest as well, since the homes would sell for a larger price and they would lose less.
Another issue I have a problem with is the vacant house fee which the city is now charging in Minneapolis. This fee gets passed on to the buyer because most banks will not pay the fees, and so the very people we are looking at to come in and renovate our homes and put them back on the tax rolls and improve our communities are the ones who are penalized for the banks’ inability to care for the houses they lay claim to. In many cases the propertis remain vacant and unsold becasue of these fees…and may eventually be condemned.
We need to find ways to offer incentives and fairness to the people who are trying to maintain and improve our communities befiore there is further deterioration.
March 30, 2009 at 3:00 am |
Hey, I ran into you at the Fifth Ward DFL convention and mentioned you in a recent blog post. Here it is:
http://adventuresofjohnnynorthside.blogspot.com/2009/03/fifth-ward-dfl-convention-side-show_29.html
Hope you like it. If you’d like to add some substantive comments, please feel free. Thanks.