Sunday, August 23, 2009

How are my property taxes calculated?

There are two components to real estate property taxes: the assessed value and the assigned rate. Both are set by the County and change every year. So assessed value * tax rate = property tax bill. So even if your assessed values go down, your tax bill could go up if the tax rate changes enough! After all, the government still needs their money to keep things running.

You can see easily look up assessed values by property address:
Fairfax County
Arlington County
Alexandria City
District of Columbia

Tax rates vary by jurisdiction, of course. Rates for 2009:
Fairfax County $1.05 (per $1000 in assessed value)
Arlington $0.865
Alexandria City $0.903
DC $0.85 but beware of vacant properties -- it jumps to $10!

You should note that a tax assessment is very different than an appraisal, and both of those values may be different than the price you paid for the home even this year! Assessments are generally adjusted every year (depending on the jurisdiction), and looks at all sales in a 12 month period. Most assessments do take into account the market value, but do not mirror it exactly. Fairfax County's website, for example, says "
Given the size, complexity and diversity of properties within Fairfax County, fair market value is deemed to be reasonably estimated if assessments at the neighborhood level generally average in the low 90's percent range when compared to sales prices." So in other words, if the tax assessed value is approximately 90-95% of the estimated sales price, it's considered to be the fair market value for tax purposes.

Here is a helpful faq on Fairfax Co property taxes,

and here is one for Arlington County.

You always have the right to appeal your property tax assessed values, but the timing and process vary by jurisdiction.

Tax bills can also be affected by deductions or exemptions. The District, for example, has the Homestead Deduction for owner-occupied properties, which reduces your tax bill by deducting $67,500 from your assessed value. There are several other programs, so home buyers do your research -- and most importantly, do NOT assume that the prior owner's tax bill will be your own total due. One of the most important exemptions is the Assessment Cap Credit, which provides that an owner can not be taxed on more than a 10% increase in the assessed value. What this means in practice is this: If you are buying a property from a long-term owner, chances are their tax bill is significantly lower than the one you will have as a new buyer not subject to that cap. Budget carefully!

Because assessed values are only updated every 1-3 years, often the assessed value might be HIGHER than the current market value. Here's a good article in the Washington Post describing how to appeal your assessment.

Tuesday, August 18, 2009

Short Sale Statistics for Northern Virginia

I got to wondering today whether more short sales are closing and thought I would share some interesting data I found. All data is per MRIS as of today.

Number of active listings designated "potential" short sales in NoVA* = 607 (# in Arlington = 57)

Number of short sales that have closed in NoVA in past 30 days = 199 (# in Arlington = 7)

Close Price to Last List Price Ratio for Short Sales that Closed = $302,258/$306,505 = 98.6%

Average Days on Market (Property) of Short Sales that Closed = 83 (Highest was 631 days). Note this represents the number of days until they got an offer, NOT the number of days that it took for the bank to approve the transaction. A quick look at the listings that closed in the past 30 days showed "contract dates" of as far back as November 2008, but most seemed to have been put under contract in the March-April-May 2009 timeframe, meaning about 3 month waiting period for bank approval and settlement. As a point of comparison, "regular" contracts tend to settle about 30-45 days after the contract date.

* NoVA = Arlington, Alexandria, Fairfax, Fairfax City, Falls Church City

I have to say that I was surprised that so many short sales closed in the past 30 days. I went back for a few months to spot check and the average seems to be roughly 200-250 closing each month going back to this Spring. This data leads me to believe that not only are banks approving more and more short sales, but they've gotten more efficient at that approval process.

Buyers, short sales are certainly not without their own risks, delays, and headaches, but maybe it's time to put them back on your shopping list.

Monday, August 10, 2009

State of the Washington, DC, Real Estate Market - August 2009

Summer has been surprisingly busy this year in the DC real estate world. Here's the latest:
Buyers are in a race against the clock to claim the $8000 tax credit by November 30, which has spurred activity in lower price ranges ($500k-ish and below) dramatically.
Northern Virginia inventory, in particular, is significantly lower than past years - check out this inventory graph, and the surprising uptick in average sales price just below it. There is still a lack of "good" inventory out there, resulting in a lot of very frustrated buyers who are moving quickly and at full price when they see something they like that is priced right. At least half of the offers I've written the past few months (and there were a lot) were competing against other buyers and, even with very solid terms, often losing to others with equally solid terms.

The lack of new construction in the area is also adding to the inventory drop. As this article notes, condo prices are down, driving sales up. But this little bit in the middle is particularly intriguing: "Because the number of projects set to deliver inside the Beltway will drop to near zero, Leisch said prices will rise sharply between 2010 and 2011."

Even with buyers jumping to write offers, it's important to structure the contracts to protect yourself. I was quoted in this Express article last month about creating "safety nets" for buyers.

In related news, and adding frustration to the market for both buyers and sellers, there are continuing challenges with appraisals, as noted in this WSJ article.

I'm hosting a free first time home buyer class at Arlington Central Library on Tuesday, August 18 at 7:15 pm. This month is really the latest that a buyer should start their search if they hope to make the November 30 deadline. If you or a colleague would like to attend, please email me to register so I can reserve a seat.
As always, please let me know if I can do anything to help you or your friends with your real estate needs.