More accurate assessments could cut your tax bill

February 2019

In a series of decisions 50 to 60 years ago, The Massachusetts Supreme Court forced the cities and towns of the state to change their method of assessing property for purposes of taxation. It had become common practice for cities and towns to assess property at much less than full value.

So, for example, the city of Springfield assessed single-family houses at 50% of full value, two-families at 60%, three-families at 65% and four families at 70%. A man named Bettigole and other owners of multi-family houses sued, and in Bettigole v Assessors of Springfield (1961) the Massachusetts Supreme Court said:

“…the assessors of each city [must] make a fair cash valuation of all the estate, real and personal, subject to taxation therein…the assessors shall sign, at the end of the annual valuation list, under the penalties of perjury, a statement ‘that the real and personal estate contained in said list, and assessed upon each person in said list, is a full and accurate assessment upon all the property of each person, liable to taxation, at its full and fair cash value, according to our best knowledge and belief.’ ”

The language is formal but the meaning is clear. Property must be assessed at full and fair cash value for purposes of taxation.

I was living in Newton in the early ‘70s when they decided to conform to the law. They sent assessors to every house in the city and produced a new value. Every three years thereafter assessments were updated by one of several computer programs designed for the purpose. Humans got involved only once every ten years.

Pretty much the same system is in use today, and based on my research over the years, it isn’t working very well. If assessments were accurately calculated, I believe, almost 40% of homeowners on Cape Cod and the islands would be paying less property tax. In effect they are subsidizing other homeowners in their towns.

The problem is that the only way to be sure you have an accurate full market value is to sell the house to a willing buyer in what they call “an arm’s length transaction.” But most houses are not sold from year to year, so they use an algorithm to make an estimate.

I looked at almost 500 random house sales selected from the Cape Cod Times over 15 years, and compared sales price to assessment. The latest group of 200 houses is typical. Here’s what I found.

1.  The cumulative total sales price of all the houses I checked was about 14% higher than the total of all the assessments on those houses.

2.  39% of homes in the sample would pay lower taxes if assessed at full market value.

3.  About 16% are assessed accurately, so their property taxes would change by less than $100, up or down.

4.  Another 45% — almost half — are under-assessed and their taxes would go up. They are currently being subsidized by their neighbors.

There is a better way, I believe. First, we could reset the assessment every time a house is sold (they do this in California). That would provide an accurate number for the full market value as required by law. Then, every year, we could increase (or decrease) the market value assessment of all homes not sold that year by the percentage change in value of all houses sold in the state (or in the county) in the previous year. If a house is remodeled an individual appraisal would be done by town assessors.

I applied this system to ten houses sold twice in the last ten years in the town of Barnstable, with prices ranging from $300,000 to $1.5 million. The results are only indicative — much more research needs to be done – but when these houses sold the second time, the total sales price was $5.8 million, while the total assessments were only $4.2 million, 28% less. Had they been assessed using the system I’m proposing, total assessments would have beene $5.6 million – very close to the sales price and true market value.

We already know that using this system would be cheaper and more transparent. And if further research bears out my tiny sample, more accurate. It seems like a no-brainer to me, but when I talk to people about it, they usually aren’t interested in seeing it happen.

This surprised me, so I asked some questions, and I believe the problem is that they all believe their houses are so under-assessed their taxes would go up if my system were adopted. In fact, almost all houses are under-assessed and only those that are very under-assessed would experience rising taxes, but even the very under-assessed homes would not have any jump in assessment (and taxes) until the house is sold, and at that point someone else will be paying the taxes.

There is no good reason not to do this if further research shows that the system of valuation I’m proposing is in fact more accurate.

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