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Why Adjusting Your Market Value Will Not Raise The New Buyer's Taxes

There is a common misperception that raising the Market Value of your home will increase your tax bill or that raising the Market Value will cause the Buyer’s taxes on the home after they buy it to be higher.  Neither of these is true

Published on: Mon, Jan 20, 2020

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Introduction

We encourage any Floridian homeowner who has any intentions of selling their home now or in the future and who plans to stay in Florida when they buy their next home to carefully check and make sure preferably THE YEAR BEFORE they sell their home to get their Market Value on the tax rolls adjusted as HIGH as possible BEFORE selling their home.  After the home is sold it is TOO LATE to make an adjustment unless our Market Value Adjustment Addendum© is signed with the Buyer BEFORE the closing.  You should also realize that if you are selling your home the last date to file the necessary challenge is about Sept. 10th each year.  After that date, if you sell that calendar year your ability to make an adjustment is lost, and even our Market Value Adjustment Addendum© won’t be able to save you.

There is a common misperception that raising the Market Value of your home will increase your tax bill or that raising the Market Value will cause the Buyer’s taxes on the home after they buy it to be higher.  Neither of these is true.  We address why raising the Market Value will not increase the present owner’s tax bill in a separate article. Click Here to see that article.  This article will address why raising the Market Value will not cause a subsequent Buyer’s tax bill to be higher. 

Market Value. What it is, when, and how it is determined

Let’s start you off with the definition of Market Value on the tax rolls:

Market Value: The Market Value of your property is SUPPOSED to be the value at which your home would sell for in a free and open market

When Market Value is Determined: Your Market Value is determined every year on JANUARY 1st by your county’s property appraiser. The county property appraiser will start publishing the values he determined on January 1st sometimes as early as January.  It differs from county to county. The important thing to know is that the OFFICIAL announcement of what Market Value was determined is made every year in August by means of a letter that is mailed to each homeowner called a “Truth in Millage Rate” or “TRIM” notice. 

How is Market Value determined:  To determine Market Value your county property appraiser uses a Computer Aided Mass Appraisal (or “CAMA”) system which looks at comparable sales and attempts to come up with an accurate market value without the need for human intervention in most cases. The county property appraiser LITERALLY pushes a button on the computer system as of January 1st and it spits out values for all properties in the county. Then, the property appraiser uses the time between January 1st and the official announcement of value I the TRIM notice in August to “polish” up the CAMA system’s output.  Some homes have had improvements made, and this allows the property appraiser to raise the home’s valuation and thus tax bills.  So the property appraiser has staff that travels around the county, checking on homes for which renovation permits have been pulled, homes under construction, and they also make random visits to check and see if unpermitted improvements have been made. 

Adjustments for the “Costs of Sale”.  Florida law requires that the Property Appraiser adjust the Market Value to reflect that if the homeowner were to sell the property that the homeowner would not receive 100% of the sales price.  We all know that there are costs in selling a property like Realtor® commissions, deed stamps, advertising, and other closing costs.  The law allows a county property appraiser to reduce the Market Value by up to 15% to account for the costs of sale.  We find that most county property appraisers do reduce the Market Values by somewhere near the 15% number. 

What your Market Value SHOULD Be:

Your Market Value on the tax rolls SHOULD BE what your home would reasonably sell for, less the “costs of sale” adjustment.  Why is Market Value on the tax rolls very often far below what it should be?  The most common response we hear from county property appraisers is that the CAMA system by its design will lag behind market value increases in a market where values are going up quickly and consistently. 

Conclusion: Why adjusting your Market Value will not adversely affect a buyer of your property

If you’ve paid attention above, then you will recall that if you sell your property, then the Buyer will have their Market Value determined on the NEXT JANUARY 1st after the sale.  So if you sell your homestead on February 2nd, 2020, the Market Value for the new Buyer will be determined on January 1st, 2021.  

Hopefully, before you considered selling your property you got a Homestead Check™ and if your Market Value was in error on the low side, then you took action to have it fixed BEFORE you sold your property.  Doing so will maximize your Portability or (“Homestead”) Savings.  For a complete explanation on why and how that works, click to read that article HERE.  So in the example above, if you realized that you had Low Market Value that warranted correction you would need to have noticed sometime prior to February 2nd, 2020.  We recommend that Market Value adjustments if at all possible be made the year BEFORE you sell your property because the last date each year for filing a Value Adjustment Board Petition to force the fix is around Sept. 10th of each year.  Let’s say that you noticed you had Low Market Value on January 15th, 2020.  What date of Market Valuation would you be fixing?  The answer is January 1st, 2020.  Remember, Market Values are determined every January 1st.  What if you had noticed that you had Low Market Value on October 15th, 2019?  Since this date is past Sept. 10th, the last date for filing a VAB Petition, you would be unable to adjust the Market Value determined on January 1st, 2019, and if you moved forward to repair the situation you’d be repairing the Market Value determined on January 1st, 2020.  However, let’s say that you noticed you had Low Market Value in April of 2019.  In this case, you’d have had time to file a VAB Petition for 2019 and you could repair the Market Value as it was determined on January 1st, 2019.  It’s important that you notice that and remember that the BUYER’s applicable Market Valuation date is going to be January 1st, 2021 which is the year AFTER any possible Market Valuation date that you might be repairing.

So, by definition, the Buyer always gets a new Market Valuation on January 1st FOLLOWING the sale date.  Nothing that we do for the Seller, which effects only prior year valuation, will affect the Buyer’s “clean slate” valuation that he or she gets after the sale.

If someone ever tries to argue that by increasing the Market Value you are somehow increasing the “comps” that the subsequent Market Valuation date might key off of, this is also in error.  The CAMA systems that determine Market Value look at comparable sales up to the market valuation date.  Do they look at the sales price of the subject property?  Yes, of course. The sales price of the subject property is the most direct comparison that there can be, and it is certainly taken into account, along with any other comparable sales.  However, that sales price will ALWAYS be higher than the Market Value that we could EVER get the Seller adjusted to.  Why?  Remember the “Costs of Sale” adjustment?  When we go to the Property Appraiser for a Seller and say “Hey!  You were too low on their Market Value on January 1st” the county property appraiser will want to know why we think that.  Usually, we will provide an appraisal from a licensed appraiser with a Market Valuation Date of January 1st.  In the negotiation for a higher Market Value, the Property Appraiser will ALWAYS bring up the Cost of Sale Adjustment and say “OK, well, you showed this value in your appraisal, but we get to reduce it for the cost of sale.” 

Therefore, our “Target” Market Value for a Low Market Value adjustment will usually be about 85%-90% of the value which our appraisal shows.  This will ALWAYS be lower than the actual sales price of the property and therefore the sales price itself will always be a higher number than our adjusted Market Value

Do you want to see if you have a Market Value issue?  The first step is to get a comprehensive property tax analysis, which we call a “Homestead Check™”.  Just click HERE to start.  Your Homestead Check™ will check your Market Value for accuracy and will also check three other very important things that can cause your tax bill to be higher.  It will tell you whether or not you have an issue and if so, it will tell you how much money it is or will cost you per year if it’s not fixed and will give you step-by-step instructions on how to fix the problem.  Remember, it’s like baking a cake- if you want a good outcome then you must FOLLOW THE DIRECTIONS CAREFULLY.  If you wing it you will probably not have a good outcome.  Not into baking cakes or following directions?  The Homestead Doctors™ are trained specialists that know how to precisely navigate the process of obtaining a Market Value Adjustment for you.  There are no fees to us unless and until we get your savings.  When we do, we split the first year of them with you 50/50 and everything else is yours to enjoy, for all your additional years in your next Florida home!  The only thing that you have to pay for up front is an appraisal of your home with an effective Market Valuation date of January 1st of the applicable tax year.  The appraisal must come from an appraiser who agrees to go and testify for you at a VAB hearing if necessary.  We have a network of over 200 appraisers across Florida who have agreed to be very reasonable in their pricing, efficient in their delivery, and who will testify for you at the VAB hearing if needed for a very reasonable fee.  Most appraisals for homes under $1MM are $400, with homes in SE Florida being slightly more. 

So remember, if success is achieved with getting your Market Value raised then any subsequent Buyer will be unaffected because:

 (1) their Market value will be determined the January 1st AFTER the sale; and

(2) the adjusted Market Value that we get will never be higher than the Sales Price.

One final important timing note for fixing Market Value

If your Market Value cannot be fixed by the time that you sell your property, usually because the Property Appraiser refuses to make an adjustment without you filing a VAB Petition after TRIM notices come out in August., ALL IS NOT LOST.  So long as you execute our Market Value Adjustment Addendum© with the Buyer of your homestead BEFORE THE SALE CLOSES, you can complete the adjustment process AFTER the sale, so long as you file your VAB Petition by the (approximately) Sept. 10th filing deadline.  And WHY would the Buyer be ok with signing the Market Value Adjustment Addendum© with you?  Because, as discussed above, you being successful with getting your Market Value adjusted will NOT affect them!  However, remember, you must file the necessary challenge to adjust your market value by about Sept. 10th.  If you don’t, then you won’t be able to adjust the market value for that year and if you sell that calendar year, any associated savings are lost. 

Yes.  This stuff is complicated.  Click HERE to speak with our Homestead Counselors™ with questions, or HERE to speak with our Homestead Doctors™ about fixing a Market Value issue for you.

About The Author

A quick word about the author.  Blake is a graduate Magna Cum Laude of North Carolina State University with a degree in Mechanical Engineering and of the University of Florida Levin College of Law with honors.  He has spent an enormous amount of time studying Florida’s property tax laws and is the founder and CEO of Florida Homestead Check, LLC.  He has handled many Value Adjustment Board petitions for clients seeking tax value adjustments and over 10,000 residential closings in his 24 years of law practice.


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