tax assessor

Tax Sale Isn’t an Arm’s Length Sale

Again on the topic of property tax assessments, the Court of Appeals issued a ruling that a purchase at a tax sale doesn’t qualify for the one-year purchase price freeze. The opinion is here. Typically when a person buys a house, the maximum tax assessed value for the following year will be the purchase price. The appellant in this case purchased properties at tax sales and argued that the assessment should be equal to the amount paid at the tax sale.

Tax sales occur when a property owner is delinquent on his or her property taxes. When a buyer purchases the property at a tax sale, the property owner is allowed up to a year to redeem the property by paying the tax sale purchaser the amount paid at the tax sale plus a percentage. If anybody is interested, the Richmond County properties that will be sold at the upcoming tax sale can be found here.

As the court noted, the purchaser at a tax sale doesn’t receive fee simple title to the property. In short, the Court reasoned that tax sales do not reflect a fair market valuation of the property and are irrelevant with respect to the statute freezing the assessment at the purchase price.

I agree with the Court’s opinion. The intent of the statute is to tax property at the fair market value and tax sales normally do not come close to bringing what a property is actually worth on the market. I am surprised the appellant went all the way to the Court of Appeals with this argument.

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Ga. Court of Appeals Property Assessment Opinion

If you have been following this blog, then you probably know that one of my favorite topics is property tax assessments. Today the Georgia Court of Appeals issued an opinion dealing a blow to the Fulton County Board of Assessors. click here for the opinion

In this case the plaintiff bought a residential property from Freddie Mac in 2011 for $207,000. Pursuant to Georgia law, in the year following the purchase of the property (assuming it was an arms-length transaction), the tax assessor may only assess the property at a value no greater than its purchase price. Therefore, pursuant to Georgia law, as long as the plaintiff’s purchase was a bona fide arms-length transaction, the assessed value of the plaintiff’s house for 2012 could not exceed $207,000.

Despite this, the Fulton County Board of Assessors appraised the property at $370,000. After an appeal to the Board of Equalization the house was assessed at $340,000. The plaintiff appealed that decision to the Superior Court and eventually to the Georgia Court of Appeals.

Fulton County did not consider the plaintiff’s purchase from Freddie Mac to be a bona fide arms-length transaction.  Therefore, the Board argued, that it did not have to honor the $207,000 figure. Because Freddie Mac is a government entity, the Board argued, it cannot act in its own best interest and therefore cannot meet the statutory definition of an arm’s length transaction, that requires “both parties to the transaction be acting in their own best interests.”

As a practice Fulton County disregarded the values of all sales involving government entities.  The Court noted that not only is the statute devoid of any language suggesting this policy, but that the Board’s position: “that the best interests of a governmental entity are not and can never be synonymous with the best interests of the public which that entity serves” is “contrary to our fundamental understanding of government.”

Broken down further, the Board basically asserts that a government entity is never buying or selling property at a fair market value. If true, this should be a concern to all citizens.

Thankfully the Court remanded the matter to Superior Court with the instruction to enter judgment in favor of the plaintiff and to consider awarding attorneys’ fees to the plaintiff.

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The Augusta Tax Hike and Your Property Assessment

On July 28th I commented on the millage rate increase passed by the Augusta Commission. After what was apparently a strong showing of displeasure by the taxpayers, the Commission voted no to the tax increase.

What changed? Mary Davis and Donnie Smith, who voted in favor of the increase less than a month ago, did not support the increase yesterday. I have found no public comment regarding the change of heart.

Some people have commented that instead of raising the millage rates to increase tax revenue, the county assessor should reassess and increase the value of  properties. Last year when I appealed my tax assessment (successfully) I got a first hand look at how the assessor’s system works.

Pursuant to the relevant statute, the property is supposed to be assessed at its fair market value on January 1.  In preparing my appeal, I looked at all the sales in my neighborhood over the last several years and the values at which the houses were assessed.

By looking at the MLS and other online listings and comparing those listings to the property records kept by the assessor’s office it was apparent that the assessor’s office does not have accurate information on MANY houses in the neighborhood. Numerous houses have second levels or other amenities which are unaccounted for by they assessor’s office.

By adding the unaccounted for square footage, the city would stand to gain a significant amount of money without raising the millage rate. This could be effectuated by simply comparing the tax assessor’s records to the for sale listings online.

That brings me to my second point:  The assessment for many houses (not the ones with unaccounted for square feet) is already well above the house’s fair market value. Fair market value is defined as “the amount a knowledgeable buyer would pay for the property and a willing seller would accept for the property at an arm’s length, bona fide sale.” O.C.G.A. Section 48-5-2(3).

After studying the sales in the neighborhood and comparing them to the assessed values of the properties, it is apparent that the tax assessor already assesses most properties above their fair market value. To advocate for a blanket increase of assessed values is simply wrong.

In short, the people who believe another way of going about the tax increase would be to increase the assessments of properties have it right with respect to increasing the accuracy of the property records. However, many, if not most, properties are already assessed above their fair market values.

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