This is particularly important information for first time home-buyers.
Real property is reassessed upon change of ownership and, in certain circumstances, the construction of improvements. The new assessed value is equivalent to the purchase price and is subject to being increased by as much as two percent each year.
Annually, each county in the State collects and ad valorem tax on real property. The tax is payable in two installments, one due on November 1 and delinquent after Dec 10, and the second due on the following February 1 and delinquent after April 10.
Under Proposition 13, passed by California voters in 1976, the ad valorem tax rate is set at one percent of the full cash (or assessed) value of real property. This limitation, however, does not apply to special assessments levied for the purpose of paying interest and redemption charges on bonded indebtness approved by county voters. The assessed value of real property is subject to being increased by as much as two percent each year, or by a larger amount upon change of ownership.
Buyers should be aware that the assessed value of real property is adjusted upon change of ownership to an amount equal to the purchase price of the property. Also, under certain circumstances, the construction of new improvements to an existing property can trigger an adjustment to the assessed value of the property.
The real property tax for any property can be calculated by multiplying the assessed value of the property by the real property tax rate for the county in which the property is located. In San Francisco the current tax rate is 1.14 percent.
After change of ownership, a supplemental tax bill may be issued to collect taxes owing for the current tax year based on the difference between the previous and new assessed value of the property. The seller is responsible for payment of taxes due prior to the close of escrow, the buyer is responsible for the payment of taxes due after the close of escrow, including any supplemental tax bill(s).
It is important to note, that as a buyer, even if you do not receive a supplemental tax bill in the mail the taxes are still due. You need to be diligent and be sure those taxes are paid on time or you will be charged an initial 10% late fee.
Since the assessed value of real property cannot exceed the fair market value, state law provides a way to challenge the assessed value when the market value declines. For questions regarding ad valorem taxes, buyers and sellers should contact the county assessor’s office at 415-554-5596, and a qualified real estate or tax attorney and/or certified public accountant. Real estate brokers are not qualified to give opinions in this regard.
Source General Information for Buyers and Sellers of Residential Real Property in the City and County of San Francisco
If you would like a copy of the above mentioned booklet, please call me, Michael Novia, South Baech Real Estate at 415-637-2409 (24 hours a day).
Filed under: Buyer Info, Seller Info
If property values go down and you can re-assess the property value to lower the tax rate, is the new (lower) tax rate now the benchmark protected by Prop 13 for future increases? In other words, there seems to be a mechanism to lower property taxes in a down market, but not raise them in a an up market.
From the sfgov.org website: http://www.sfgov.org/site/assessor_index.asp?id=15241#HDIAMAV
( Under State law (Proposition 13), real property is reappraised only when a change-in-ownership occurs, or upon completion of new construction. Except for these two instances, property assessments cannot be increased by more than 2% annually, based on the California Consumer Price Index. The property tax rate is 1% plus any bonds, fees, or special charges.
How do I appeal my assessed value?
Under State law, if the market value of your property (recent comparable sales) as of January 1 falls below the assessed or taxable value as shown on your tax bill, the Assessor’s Office is required to lower the assessment. This type of property tax relief generally applies to recently purchased property. Assessment appeals maybe filed from July 2 to September 15. Please make sure to file your application with the Assessment Appeals Board before the deadline.
Informal Review of Assessment
If you have reason to believe that the market value of your property as of January 1 is less than the amount shown on your annual notice and you have factual evidence to support a lowered assessment, you can request an informal review by a staff appraiser by contacting us before September 1 by phone (415) 554-5596 or email assessor@sfgov.org. Requesting an informal review does not preclude you from filing a formal appeal with the Assessment Appeals Board.
Assessment Appeals Board
If you disagree with the assessed value or our informal review, you may file a formal “Application for Changed Assessment” with the Assessment Appeals Board, an independently appointed review board. Application information can be obtained from the Clerk of the Assessment Appeals Board, City Hall – Room 405, 1 Dr. Carlton B. Goodlett Place, San Francisco, CA 94102, phone (415) 554-6778 or web at http://www.sfgov.org/aab. Assessment appeals must be filed with the Clerk between July 2 and September 15.
Hope this helps!
Hi-
I’m trying to figure out how to get my home reassess, I’m pretty sure the value has gone down sicne I purchased my home two years ago. Can you please help point me in the right direction.
Thanks, Cindy Mayhew
Hi Cindy,
You should contact the city (see above). The requirement is that you need to have factual evidence to support your claim. If you want – I can help you by checking the MLS for recent sales data for “like” properties in your neighborhood. That may be a good starting point for you. If it does indeed appear that your home has decreased in value then you may want to take further action. Please note that I am doing this as a free service and as noted above – I am not qualified or trained in this area. You will most likely need to speak with a tax/real estate attorney or CPA. Feel free to call me at 415-637-2409.
I am purchasing a home and the settlement document has me paying 4 months of taxes at the old assessed value of the house for a 4 month reserve fund. The value of the house has declined from nearly 300k to 200k (the price I purchased at). At a tax rate of 1.25% this should put me at $208 a month vs about $300 for property taxes. My concern is I am over paying taxes by nearly a $100 a month from the start and noone can explain to me if this will be automatically fixed at closing. I also don’t understand why I am overpaying my 4 month reserve fund by $400 dollars at closing.
Thanks, Justin (Taxed confused first time homebuyer)
Hi Justin,
I would not count on anything being automatically fixed at closing. Contact your lender and ask them why you are being required to put more money into your impound account than what is necessary. If they are not clear with you than ask again and again until you completely understand what’s going on.
Also, if your real estate agent is not being helpful contact the agents Broker and hopefully you will get some better answers.
Good luck!
what happens if you dont pay the property tax reassessment
hi,
I have a question about the property tax. The house I am going to purchase had the market value of around 950,000 (not sure) in 2007 and the current property tax for this house is about 12,000 a year. If I buy this house today at the price of 500,000 then the property tax will base on this purchased price (500,000) which is around 6,000 a year or it will base on the current market value which is around 700,000. Thank you in advance.
Your property tax will be based on current market value. The Assessor’s Office is responsible for establishing property values. Sounds like you may be buying this property from a family member? If you have not done so already, you may want to seek the advice of a real estate attorney.