My Real Estate Tax Assessment Changed. What Does It Mean?

From Centreville to Vienna to Arlington and points in between, homeowners have already received (Arlington) or will shortly have their new real estate tax assessment in the mail. (Fairfax County assessments will be available 2/28)   I am guessing most will be higher than last year since we had an overall 3% increase in prices in 2011.

I am often asked if the assessment is reflective of market value and the answer is  – not really.

On the Fairfax County website it does state, “The Constitution of Virginia requires real estate assessments to represent fair market value.”  So why did I say the assessment does not reflect the fair market value of your home?  Well, let me ask a key question.  Did the tax assessor come into your home?  Unless you know the individual and they came to your holiday party, the answer is probably no.  Thus two different  4 bedroom, 2 1/2 bath homes in the same neighborhood that are the same size and sit on a lot of similar size will have the same assessment even though one has a new kitchen, granite counters, fresh paint, gleaming hardwood floors and the other has original appliances, worn and tired carpet, peeling paint and a CAC unit that went out last summer.  Obviously the market value of these two homes is dramatically different but the assessment will be the same.

Additionally, it would be nice if the assessors had all the info they needed to make a fair assessment but they don’t.  I can not tell you how many finished basements I see that are not reflected in the tax records.  Additions and decks are almost always in the tax records but that extra bath in the basement, the finished attic, the new furnace and many other items are often not which is another reason it is hard to use assessments to determine value.

Furthermore, assessments are static and the market is dynamic.  I can not say with certainty what the value of a home will be in November but I can, with 100% accuracy tell you what the assessment will be.   The further we get into the year, the less relevant the assessment becomes.


If  I am evaluating a condo, townhome or detached home subdivision with similar models, I really have no need for the assessment as there are usually enough settled sales to give guidance on a fair market price.  However, if the property is rather unique like some of the contemporaries one might find in Reston or in  places like Arlington or Alexandria where several neighborhoods boast older charming homes that over the years have been uniquely remodeled,  I sometimes use the assessment as my last evaluation tool.  The assessment is not an absolute value but can, in some circumstances, be used to help determine value.

On unique properties, I will use the best available comparables and make adjustments for various features such as number of bedrooms,  living space, lot size, basement type, garages, and many more.  I will get to a price and then adjust that number up or down based on current market conditions and a bit of gut feel.  Once I get that final number, I will often go back and sort of “check my work” via the assessment.

At different parts of the market cycle, homes are selling above or below the assessment by some percentage.   In complicated cases,  after getting my number, I will take the settled price of the comparables and determine the percentage they sold above or below the assessment.  I will then average out those differences and  apply that number to the the assessment of the property I am evaluating.  If the resulting number is close to the number I came up with, it reinforces my original calculations.   If it is not, I will review my initial analysis.  The initial analysis carries the biggest weight by far but I may massage the number based on the assessment analysis.  Bottom line, pricing a property involves both analytics and a bit of intuition combined with market experience  No one method holds all of the answers but when several lead to the same result it builds confidence.


The other comment I hear about assessments concerns tax bills.  In the past few years when assessments went down, folks thought their tax bill would go down at the same percentage.  And when prices were rising, folks were happy they were building equity but worried their taxes would become unmanageable.

Reality is that when prices decline, it is likely that the tax bill will go down but not as much as one thinks. The local government depends heavily on real estate tax revenue so when assessments go down, tax rates inch up to cover the budget.   The individual homeowner does not save as much as anticipated.

Conversely, when prices rise, we sometimes see headlines that the tax rate is being cut.  Hey, it makes the politicians look good.  Even though the total tax collected is up they can proclaim they cut the tax rate.

Actual numbers:   In Fairfax County in 2002, before the real estate boom, the rate was $1.21 per $100 of assessed value.  At the peak, in 2008, the rate had dropped to $0.89 per $100 of assessed value. When prices declined, the rate rose and in 2011 stood at $1.07 per $100 of assessed value.

Bottom line, whatever my tax may be and regardless of whether the assessment reflects market value or not, I would rather open that envelope and see rising values than falling values.

Photo credit:renjith krishnan






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