its official we owe more than its worth

February 20th, 2008

It’s Official – We Owe More Than Its Worth

I got our property assessment from our county today in the mail, and it is official, according to them we owe more on the property than it is currently worth. Not too much more, comparing the assessed value with the current principal amount on our mortgage we only owe about $500 more than this assessment. But still, it is kind of irritating. But that is not the most irritating part of this letter, to me.

The thing that really irks me is that on top of that, apparently we were idiots and paid more for it than it was worth when we bought it, too. The last assessment was done in 2004, according to this letter. This current assessment is based on sales data between January 1, 2005 and December 31, 2006. We bought the house in January 2007. So, really, we shouldn’t have paid any more than this assessment value shows, because it is basically the value of our house at the time we bought it. Yet, we originally paid $2000 more than the county’s new assessed value. We did get $1500 back from the sellers at closing towards closing costs, so I guess, net, we only paid $500 more than this assessed value. But we thought we were actually getting a deal – it was originally listed for $6400 above what we ended up paying, and was in better condition and in a nicer neighborhood than most of the other houses we looked at that were listed for the same price. Apparently everything was being listed for much higher than it should have been, and we are sheep. Well, we tried. The assessment our loan company did for the mortgage came back at $1600 more than we ended up paying, which we thought was kind of low but still meant we did an acceptable job on the price front. Live and learn.

It is our first house (and honestly, we don’t plan to move until we retire unless something very unexpected happens) so I guess we didn’t do that badly, all things considered. Well, except the whole 100% financing thing. We’ll start targeting that when our other debt is completely gone. I don’t expect to pay PMI for the whole ten years the bank thinks we will. :)

The bright side to all this is that the house only came back at $900 more than the last assessment, so our property taxes shouldn’t go up too much. Always a silver lining!

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26 Responses to “It’s Official – We Owe More Than Its Worth”

  1. I wouldn’t worry about the assessed value too much or whether or not you “overpaid”, especially since it’s your life home. I have no idea what our home is assessed at but I am certain it was assessed for less than what we paid – even in the condition it was in. In my humble opinion it’s worth what you think it’s worth for your family to raise your kids there. And the lower they think it’s value is, the less you get to pay in taxes :)

  2. Every state is different, but the number on your assessment may not be worth much as an estimate of your house’s value. For some reason, in my state, the assessment is always fifty percent of what they think the house is really worth. And they always lowball the actual value. Houses around here typically sell for much more than their doubled SEVs, and the longer you are in the house, it seems, the more out-of-sync those estimates get.

    Of course we are in a very soft real estate market, so it is possible your home’s value is lower. There’s nothing for that, though. A lot of people are in the same boat.

  3. Well, maybe I’ll stop being irked about paying more than the assessment says. Y’all know how I hate not getting a good deal. :)

    I’m more irked about that than I am about owing more than it is “worth”. I’m an odd duck. :)

  4. It seems to me that the county assessed the *actual* value of the home, not the market value. It doesn’t really matter, I think. As one commenter mentioned, market values can often be WILDLY different from actual value.

    I’d say the fact that yours was so close is actually a good thing. I mean, how would you have felt if they came back with a number that was significantly lower than what you paid? With the inflated home prices in the housing bubble, some economists estimate that many houses were purchased for twice what they were actually worth!

  5. I too agree that you should not assume that the assessment is equal to the value of your home. Every state does it differently but here in WI your assessed value is only supposed to be a percentage of what your home would sell for on the market What’s more important is how it compares to homes currently on the market. In addition, you indicated that it was the best home in terms of price and condition when you purchased it. Then it’s very possible that you did get a great deal at the time. It’s also possible that in the time since you purchased the home the overall market in your area decreased and what was a good deal at the time would no longer be so if you put it on the market today. But if that’s the case you can’t forget all the tax breaks and enjoyment you got out of the home rather than renting. Lastly, in WI, just because your assessment goes up or down doesn’t mean that your tax bill will follow. What you need to consider is how did your assessment change compared to the average in your municipality? If the average assessment went down by 5% and yours only increased (for example’s sake) 1%, you will still bear a larger share of the tax burden than before. And that’s the other piece – what is the total tax burden this year? Everyone’s assessment could have gone down but if your municipality’s budget went up by 15% everyone might be paying more in taxes this year. Sorry this was so long and probably in your case your taxes won’t be affected much, but I wanted to help you get rid of the feeling that you made a mistake when you bought your house. It sound like you did your homework back then!

  6. I think most everywhere the assessed value is lower than the market value. So if you only owe $500 more than the assessed value I think it’s safe to say you are not upside down.

    Our state just did reassessments and they are now much closer than it was. I think here in NH they are about 15% below market value.

  7. Honestly… I have no idea :)

    The assessment says “100% of true tax value” – whatever that means :) .

    On the news a LOT of people are complaining about their assessments and how they are too high. Ours only went up by a little less than 1%, so for 3-4 years I don’t think that is really that much. So maybe ours is on the low end and our taxes will rule. Heh.

  8. In my area the tax value is about 15% lower than what I could sell it for on the open market.

  9. We bought our house 5 years ago. The following year, we got our assessment in the mail and it was for almost $20,000 less than we paid. I freaked. Then I called our realtor and he explained basically what the other comments on this post have said. The assessed value is what they base taxes on, so it’s good to have that be the lower of the two numbers. The sale price is based on a realistic idea of what the house would sell for, which is much more accurately determined by looking at recent sales of similar houses in your neighborhood. When I looked at those numbers, they were all about the same as what we had paid. So the lower assessed value really just keeps our taxes lower – if we were to sell the house, a realtor would set the price based on what other houses in our neighborhood are selling for, not the assessed value.

  10. Our last assessment went up $110,000 so don’t feel to bad about 1%! They hadn’t done them in a about 10 years and the market really changed. Thankfully they lowered the tax rate so we didn’t get killed but some people got really freaked out.

  11. Well, are they assessing home + land or just home or just land? That can also make a difference. And think how chuffed you’d feel if that was the value of the *home* only.

    I would, seriously, look at how your assessments are traditionally handled–in my county, they assess homes for about 1/3 their actual value on purpose. Of course, this means my property taxes are less than 1/3 of 1% of my home’s value every year, which is all to the good.

    Remember, too: if it looked like a good deal when you bought it, even though it was higher than the assessed value, the same is likely to hold true when you sell it.

  12. Don’t worry too much about it. I don’t think our property tax assessments have ever come close to accurate. I have no idea how they figure it, but it really doesn’t have much bearing on the true value of your home. According to ours, our house is worth about 100K less than what we could sell it for today. Whatever!?! I just pay the tax and ignore the valuation, the true value of your home will come from a proper appraisal when you go to sell it.

    Take Care


  13. My friend got two loans of her house for 100% financing, an 80 and a 20 loan to keep PMI off her main mortgage. How much are you paying? Is it less expensive to get the split mortgage?

  14. Home prices, assessments, etc, are just crazy. While it’s not great, what matters most is that you’ve found a place where you can live and that you’re able to pay for it.

    They’re that strange balance between a financial, a practical, and an emotional needs/desires.

  15. @Kim – it depends on the situation. the more expensive the home is, the worse the PMI payment is (it is a percentage of your mortgage) but we live in a very inexpensive area of the midwest (if $900 is close to 1% of our home’s value one can figure out about how inexpensive) and for us, the significantly higher interest on the 20% mortgage would have cost us more than the PMI payment does. So we chose one 100% mortgage and PMI. But it is very different in other places.

    @ everyone else – thanks for the reassurance about the house value. My spouse told me to chill. Lol. I just hate feeling like I didn’t negotiate enough, heh. But maybe I did after all. :)

    We get these rebates on our property taxes to reduce our home’s assessed value, so I thought the assessed value was actually the real value, but maybe not. Who knows. Hopefully nothing happens and we don;t have to sell it anytime soon.

  16. Here is Florida where the market has really tanked, our assessments are still lower than what they are worth. Another silver lining for you…if the assessed value is lower than the property taxes will be lower too. And like you said, if this is your life house, you shouldn’t be concerned about it. If you got a good mortgage rate and it fits in with your income/spending, then consider yourself golden right now!

  17. Nothing to worry about as long as you don’t have a cash flow problem. Assessments are a joke – they really should be a range IMO.

  18. I’m sure the county will be more than happy to raise the assessment if you ask nicely!

  19. As many others have said, the county’s assessed value for taxation purposes should be significantly lower than the actual sale value. Mine has been as low as 20% of the real value, although now it’s about at about 60%. During the bubble, the county got just as greedy as everyone else and jacked up assessments, a bit of a shock to those of us who did NOT buy our houses at inflated prices. This year, though, the assessor snapped back to reality and lowered the rates.

    If your county does not send you an itemized statement, you should ask for one. Often they’re wrong, and you can get them to lower your assessment (i.e., your taxes). SDXB, for example, discovered the assessor thought he had a swimming pool (nope) and two more spigots than he did (hereabouts you get taxed on the number of water faucets in your house, among other things).

    So check. You want to push your tax assessment DOWN, not up.

    And don’t worry. If you intend to live in your house for a few more years, its sale value will come back up eventually. Real estate devaluation has happened before…within living memory, as a matter of fact — mine. :-)

  20. The real value of the house is how much you’d get for it in the market, not how much it’s assessed at all.

  21. I don’t think you should worry about might have been, if you were, then you might start thinking about “what if we waited until the credit crunch?” etc.

  22. You want your assessed value to be as low as possible, that means lower real estate taxes. Keep an eye on the price that homes around you sell for and if the market value of your home really does fall below the assessed value, then appeal it with your county assessor (or whoever does it) and get your real estate taxes lowered.

  23. It’s unfortunate, but the past is the past. Get that 20% in there so you can knock off PMI. Also don’t forget that in some cases you can deduct PMI.

  24. Dont you all fret…My son has a home he bought 2 years ago new and paid 160. It is now valued at $61000. And the taxes are not adjusted for 18 months, so we wont even see a break there for quite a while..


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