A Bubble in Assessment Appeals

May 3, 2006

It is interesting that two articles on real estate in Loudoun County ran in the same issue. One dealing with homes sitting on the market in the Leesburg's 20176 zip code with asking prices declining and this one about the wave of inquiries and tax assessment appeals where average assessments increased 28%. The reality is 2005 was the last "hot" year for real estate appreciation in the region and assessments look backward at data to arrive at January 1, 2006 values. It is understandable property owners are in shock especially when their homes are declining in value in the current market.

A statement by the Loudoun County assessor "The fact that the market is softening will be reflected in next year's assessments" is puzzling. I cannot ever remember assessments going down. Or, for that matter, real estate taxes declining in general. There are two variables involved in the ultimate tax we pay: assessment and tax rate. The Board of Supervisors just lowered the tax rate 14% ($0.89, down from $1.04 last year) so the average tax bill will still increase 14% (28% minus 14%). Still a bitter pill to swallow.

Here are excerpts from the post article:

Loudoun Leads in Assessment Appeals

County Among Several in N.Va. Fielding More Complaints Over Home Values

By Amy Gardner
Washington Post Staff Writer
Tuesday, May 2, 2006; Page B01

The number of Loudoun County residents appealing their property tax assessments has tripled this year, a sign of a backlash throughout Northern Virginia to another year of double-digit percentage increases -- and higher tax bills.

E-mails, phone calls and formal appeals over property assessments are up this spring in several localities. Fairfax County officials reported an increase in appeals over last year, from 1,700 to 2,100. The 5,000 appeals in Loudoun were the most in Northern Virginia.
. . .
Many homeowners believed their assessments were wrong because the market has begun to cool. "My house would never sell for that now," Kaufman (county assessor) recalled hearing from many. But assessors use sales data from 2005 to establish assessments, which are required by state law to reflect 100 percent of the market value as of Jan. 1 of the tax year in question. The fact that the market is softening will be reflected in next year's assessments, Kaufman said.

McKenna (homeowner) never questioned the accuracy of her assessment; her home in Lansdowne rose in value from $619,600 to $830,400. What bothers her, she said, is that the Board of Supervisors didn't lower the tax rate enough to keep her tax bill even. And that is what she and so many property owners across Northern Virginia are upset about.

Read the full article here.

Note: we inserted picture above.

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