Your home value may surprise

The Arizona Republic
Sunday, February 18, 2007

If you've seen homes selling for less in your neighborhood lately, you might be thinking there's a silver lining. Your home could be worth less, so your taxes might be less, too. Right?

The answer is an unqualified maybe.

Homeowners in Maricopa County got an envelope in the mail last week showing their homes' new assessed value. And on average, that value is up. Not the 52 percent rise of the boom days, but still up, 13.4 percent overall.

Figuring out what that means for your taxes is a trickier proposition.

Valley home valuations rise again, 13.4 percent overall

Many Valley homeowners got a surprise in the past couple of weeks when they looked at their new property valuations.

Home values climbed in most cities for the second year in a row, despite the slowdown in metropolitan Phoenix's housing market.

That's the good news. The bad news is property taxes could rise as well.

Tax bills are due out in October, and those could surprise homeowners more than their recent valuation.

Property tax bills lag valuations by almost 18 months because of Arizona's complicated property-tax system. So the tax bill homeowners get in the mail this October will be based on the assessment of their home's value a year ago - after Valley housing prices skyrocketed 52 percent.

"The tax bill people get this fall could be the one with the big increase," County Assessor Keith Russell said.

The valuation most Valley homeowners got in the mail during the past few weeks will show up on property-tax bills in fall 2008. These valuations show an overall 13.4 percent increase on single-family homes.

"We recognize the housing market slowed last year and tried to incorporate that in the most recent valuation," Russell said.

Despite the increase in property valuations, few homeowners are likely to complain. The assessor's new values on most Valley homes are below the actual values or prices those properties could sell for now.

Nick Wood, a Phoenix zoning attorney who lives in Ahwatukee Foothills, said his latest valuation jumped 4 percent over last year's valuation to hit $685,500.

Like other homeowners, he has mixed feelings because while the increase could mean higher taxes, it also means his house is appreciating.

"You know, part of me says it is excessive, but another part of me says obviously the value of the house has increased and there should be an increase. There is justification for an increase. So it's kind of bittersweet."

Convoluted system

Residential property taxes in Arizona are not easy to understand.

Homeowners are taxed through a formula based on valuations set by the county assessor and tax rates set by different budget decisions from more than a handful of municipalities and school districts.

The particulars can vary by city, but here is the basic breakdown of how taxing districts determine your taxes: special districts 7 percent; community college 10 percent; county 11 percent; cities 11 percent; and schools 61 percent.

Decisions those groups make later this year and next year will determine what homeowners' tax bills are for fall 2008. But the taxes will be assessed on the valuations just received.

Last September, most Valley homeowners were pleasantly surprised to find that their tax bills fell. The average property bill in Maricopa County declined 3 percent.

An individual tax bill is a measure of how large the overall tax burden is and how many people have to pay, according to the county assessor.

In fast-growing communities, the cost of city, school and special district services is spread among more taxpayers. In communities where those public agencies float lots of bonds, the total tax rate goes up.

What you pay is the result of the battle between the two. If a community grows faster than it generates new taxes, the individual bill falls.

"Even if cities hold tax rates flat, they are going to bring in more money this year because of the Valley's growth," said Jay Butler, director of realty studies at Arizona State University's Polytechnic. "If cities are smart, they will drop tax rates to keep their homeowners happy."

Appeal is possible

Anyone can appeal his or her property valuation.

If homeowners do not think they can sell their homes for the "full cash value" listed on their valuation, the assessor says to appeal. Homeowners are actually taxed on the "limited property value" on their statement, which is significantly lower.

County Treasurer David Schweikert said homeowners should appeal if the assessor has something wrong with the information the valuation is based on. For example, if the square footage looks high on a valuation or if the assessor has a swimming pool on the property when there isn't one.

"Homeowners should also look at 'comps,' or comparables, in their neighborhood to see if they line up with the assessor's valuation," he said, referring to what similar homes are selling for nearby.

They can check values of other homes on the assessor's Web site, assessor.

Last year when valuations hit a high, appeals were filed by 12,000 of the 1 million Maricopa County residential property owners. That was up by about 1,200 from the number of people who appealed the valuations before.

Russell says about 50 percent of appeals are successful.

What could spur more appeals this year is a wave of mortgage fraud in the Valley that has inflated some home values through scams called cash-back deals. The fraud involves obtaining a mortgage for more than a home is worth and pocketing the extra money in cash. The deals are pushing up comparables beyond the true value of a home. Mortgage fraud opponents say the deals could inflate property taxes.

"Mortgage fraud could create a nightmare for the county assessor trying to base fair valuations on comps," Schweikert said.