Welcome to all things home with Tina Beliveau and friends. This episode is inspired by a great question from a past client who is part of our TBG community. She owns a home in Roland Park and like many people recently got a copy of her new updated tax assessment in the mail.
And when comparing her assessment with her immediate neighbor, she noticed that their assessments were significantly different, even though her understanding is that they have the same size house and was basically wondering what's up with that. So I'm going to address that question, but I actually want to start by backing up and sharing two tidbits about tax assessments that come up all the time. And anyone listening to this, I just want you to know this information because these are some things that people seem to worry about all the time.
The first question I get a lot is, does it matter if my tax assessment is wrong? And the answer is, it depends. So if your tax assessment is lower than what your house is actually worth, you are winning. You are saving money.
You are flying under the radar. There is nothing to be lost or gained. So just leave it that way.
You don't need to call it to the attention of the authorities. Enjoy the tax bill you are paying. That would theoretically be higher if they were looking at your house very closely, which kind of the spoiler alert of all of this is these assessments come from algorithms, and they're based on square footage, neighborhood data, sale price changes overall in the region.
So they are not nearly as specific as a market estimate from a realtor, and they're not even as accurate as perhaps a estimate, although those can be problematic as well. Now, if your assessment is too high, then yes, I would say that it matters. As a homeowner, you have the right to appeal your assessment, which involves filling out a form, sending them some information, some comparable properties, and making your case that they should lower the assessment.
And it basically goes to a department that looks at it, and they might lower your assessment. They might move forward and do this little hearing that you would need to attend. It's certainly worth pursuing if you are quite sure that your assessment is too high.
The only thing I will say is in my experience, home values have increased so much in the last five years here in Baltimore and in the United States overall, that your assessment is unlikely to be too high unless something very unusual has happened. So I would just be careful about calling attention to a house where everything's fine and you should just kind of let sleeping dogs lie, as it were. So that is the answer to, does it matter if my assessment is wrong? The other question I get all the time is, oh no, my assessment is lower than what you're going to list my house for.
Is that going to impact resale value? And the answer is no. In fact, I think it's kind of a helper if the agent on the other side knows what they're doing. So here's the deal.
When we go to put your house on the market and say it's worth $500,000, but the assessment is only $420,000, that is not going to take down the value of your house. Buyers, we have so much information at our fingertips as consumers in our world. It is easier than ever for people to ascertain the potential value of properties because thanks to Zillow and Redfin and Realtor.com and all of the MLS being public, just about anyone can look up what homes have sold for.
Obviously, as realtors, we have way more data in the MLS and way more level of detail to do things really detailed and accurately. But the bottom line is, if you put your house on the market at market value, buyers are going to want to buy it. They are not going to stop and go, oh no, the tax assessment's a little lower.
So with that being said, the benefit of having a lower assessed value, I always point this out to my clients when we're making an offer. We check the assessed value. We look and make sure it's not too high or too low just because that impacts what the estimated mortgage payment's going to be and the lender looks at that.
And we just want to make sure that your payment is kind of in the range of what you would expect based on the price that the price range that you're shopping in. So if you're about to buy a house that's under assessed, I point that out and say, hey, good news. The tax bill's a little bit lower than it would be if they had assessed it at its very fullest, most accurate value.
So enjoy that while it lasts. Tax assessments always go up over time. But the cool thing is if you lock in right away with the Homestead Tax Credit, see episode one of this podcast, you can get locked in at this lower rate and then enjoy a slow gradual increase over time, which is like a double win.
So don't stress about being under assessed as it relates to resale value or calling it to the attention of the taxing authorities. Now, to answer the question of my dear client who is probably now five minutes into this episode wondering what her answer is, she asked me why is her neighbor's assessment higher than hers. So coming back to the MLS and the level of data we have access to and just the ease of finding the right information quickly, I was able to research her house and the neighbor's house in question, and I found a couple things.
First of all, we all just have to recognize algorithms are algorithms when it comes to home valuations. You might get our HomeBot emails if you're in our network. HomeBot is pretty good.
I find that HomeBot is more accurate than Zillow. But if you bought your home five years ago and then you did a ton of improvements to it and HomeBot doesn't know, it is going to be making the assumption that the house is still kind of in the same condition at the price that it sold for at that time. So the big reason algorithms can be off is if you've made substantial cosmetic improvements to a home or maybe even put on some kind of addition, that's when the algorithmic values can be very, very off, and that's where calling in an agent like me or our team members can really help you dial in on what the exact value is today.
So that's the main thing to know overarching with tax assessments, Zestimates, HomeBot, and other products of that nature. So with assessments, there's a few things that can happen. First of all, there is always a chance when you buy a house at a sale price that is way higher than the existing assessment.
The state has the right to actually trigger a one-time reassessment based on your purchase price at that time. I don't see it happen very much. It's very, very rare.
So that's just something to be aware of in theory that could happen. The other thing that can trigger a reassessment outside of the three-year cycle is if you make a substantial change to your house, typically an addition where you're adding square footage, because you pull a permit with the county or city to do that, they know that your house is bigger and might trigger a reassessment. And fun fact, that just happened to me with our home that we put an addition on last year.
I got a notice in the mail late last year that they reassessed and added onto our tax bill. So those are the two scenarios where there are sometimes changes for a specific house versus more like the macro changes of the rolling three-year cycle. So when I pulled up my client's house and her neighbors, the first thing I looked at is what their assessments were versus what they paid for the houses and when.
And what I saw was that her neighbor actually bought her house even longer ago than she did. So my first thought was that this person has probably been a part of two to three more reassessment cycles. So that could explain why their assessed value is about 21% higher.
But then I was like, hold on, let me double check the tax records and look at the above grade square footage. That means the square footage that doesn't include the basement, which is what I consider the most important frame of reference for true square footage. Basement square footage matters, but it's not the first thing I look at.
And what I saw is that her neighbor's house is actually 224 square feet larger than her house. And I think the reason is that the neighbor has a porch that is turned into actual livable space, whereas I believe on my client's house, it's just an outdoor second story porch. So the square footage difference is most likely the culprit for the difference in the tax assessments and therefore the tax bills, plus the fact that that neighbor has owned their home a little longer and might have had a reassessment at some point in the past and just more time for that tax bill to catch up.
Long story longer, both of their assessments are definitely below today's market value. So although it's frustrating potentially to have a higher assessment than a neighbor where you feel like your homes are pretty similar, if you're flying under the radar, my advice is to keep flying under the radar. Hopefully everything that I said made sense.
I know that I talk quickly and do this all day every day. So if you have questions and want to unpack this more deeply as it relates to you, feel free to reach out to me or anyone on the team. Our best email is hello at thebellevogroup.com. And if you have any other questions about home ownership or buying or selling, please reach out.
We would love to help you and we will talk with you soon.
