Frequently Asked Questions
WHY IS THE ASSESSED VALUE OF MY PROPERTY INCREASING
WHILE THE MARKET VALUE OF MY PROPERTY DECREASING?
In accordance with California’s Prop 13, your base year property value may be increased by 2% per year (an amount intended to compensate for inflation). In general, Counties apply this increase across all properties unless you dispute your Assessed Value.
Click here for a free property analysis. We have worked on nearly all property types in each market so we can provide a good estimate of potential savings.
Yes. Because real estate values have decreased in the past few years, many property owners who reduced their property taxes in the past are now entitled again. Click here for some examples.
Passed in 1978, Prop 13, amended the state constitution so that the yearly taxable value of real property in California must be the lower of either:
- the property’s base year value (established when you purchased or built your property) adjusted for inflation, or
- the property’s fair market value on January 1 for the applicable tax year.
Real property typically increases year-over-year, except in down markets such as today’s. Proposition 8 was passed to address temporary declines-in-value.
California voters passed Prop 8 in 1978, a constitutional amendment that allows a temporary reduction in assessed value when a property suffers a “decline-in-value.” A decline-in-value occurs when the current market value of your property is less than the current assessed value as of January 1. Go here for more details on Prop 8.
Proposition 8 requires the county assessor to annually enroll either a property’s adjusted base year value (Proposition 13 value) or its current market value, whichever is less. When the current market value replaces the higher Proposition 13 value on the assessor’s roll, that lower value is commonly referred to as a "Prop 8" value.
Although the annual increase for a Prop 13 value is limited to no more than two percent, the same restriction does not apply to values adjusted under Prop 8. The market value of a Prop 8 property is reviewed annually as of January 1; the current market value must be enrolled as long as the Prop 8 value still falls below the Prop 13 value. Thus, any subsequent increase or decrease in market value is enrolled regardless of any percentage increase or decrease. When the current market value of a Prop 8 property exceeds its Prop 13 value (adjusted for inflation), the county assessor reinstates the Prop 13 value.
Reference: Section 2(b) of Article XIII A of the California Constitution and section 51 of the Revenue and Taxation Code.The above is copied directly from the California Board of Equalization’s website.
Think of your Prop 13 value as an upward sloped line that increases in value 2% every year: this is your 'Value Ceiling'. If you exercise your rights to lower your property taxes under Prop 8, you can lower your value below this ceiling for however long Pacific Union Property Advisors can maintain a lower value than your Prop 13 value. Where the language gets confusing is that your value is always capped with the Prop 13 ceiling, whether you utilize your rights to reduce the assessed value under Prop 8 or not.
EXAMPLE: Client X purchases a vineyard property for $1,000,000 in 2005 and in 2010 Client X's property tax assessed value is $1,104,080 (2% increase over 5 years). In 2010, Client X hires Pacific Union Property Advisors to reduce his/her property taxes. For the 2010/2011 Tax Roll, Pacific Union reduces Client X's property tax assessed value to $500,000 under a Prop 8 appeal and saves Client X approximately $6,000 for that year on property tax payments. For the next year, the County could attempt to raise Client X's back to the Prop 13 value (plus the 2% increase) for a 2011/2012 value of $1,126,162.
**Note: this is where the State's language says that under Prop 8 the 2% increase is not capped because in this case the County would be increasing the value by over 100% from the previous year ($500,000 in this case) but still never above where it would have been!**
Fortunately, Pacific Union Property Advisors is able to maintain Client X's property tax value under $600,000 for the 2011/2012 tax roll and save Client X more money again. It is not until the 2020/2021 that Client X's property has a market value of $5,000,000 but fortunately he/she is still protected under the 'Prop 13 Value Ceiling' and the assessed value for Client X's property on the 2020/2021 tax bill is only $1,345,868 (2% annual increase in value from the original base year value in 2005 of $1,000,000).
The Myth is that the County Assessor gives you a reduction now but can reassess your property at whatever the future market value of your property is no matter what the percentage change from your original Prop 13 value. This is simply not true!
The Prop 8 Common Misconception
Here is a chart showing how Prop 8 can save you money during a downturn but provides protection when times inevitably get better.
You can reap the benefits of the property tax reduction but always maintain a ceiling of property tax payments under your original Prop 13 valuation.
A Base Value reduction is a permanent reduction in your assessed value. This type of appeal is filed if the property owner thinks they overpaid on the purchase price.. Possible reasons for filing a “Base Value Appeal” could include the County enrolling a value greater than your purchase price or making an error. Click here for examples of these types of appeals that we are actively working on.
A “Proposition 8 Decline-in-value Appeal” is a temporary decrease based on changes in market conditions. Typically the Assessor reviews these values on an annual basis.
Everyone is eligible. Properties that were bought or built from 2000 – 2008, are most likely assessed at a higher value than today’s market value.
Typically our clients save approximately 20% on their tax bill. We can’t guarantee any savings, but with our knowledge on values in each market, we can have a good estimate.
The Formal Appeal process can be drawn out depending on the volume of cases being heard. The assessment appeal period is from July 2nd and November 30 (September 15 for some counties) of the year that is being appealed. Once the appeal is filed, we provide documentation for our claims to the Count Assessors Office and attend all hearings in your behalf, usually in the spring of the following year. You will be notified by the County Assessor’s Office as to the result of the appeal and the amount of your refund when the hearing process is finished.
We file an Informal Appeal directly with the Assessor. We also file a Formal Appeal with the County’s Board of Equalization for each property, which reserves our client’s rights. In essence the two appeals are the same process; however, if we are unsuccessful with the Informal Appeal we can escalate the matter to the Appeals Board and have an appeal hearing. We like to file Informal Appeals for each property since they generally get resolved in less than 6 months and typically result in our client receiving a lowered tax bill for their upcoming payment compared to a refund a year later.
Nine times out of ten our appeals cover the current year’s property taxes. There are rare instances where you can go back prior years for a reduction (click here for examples of projects we are working on). We like to work on subsequent years’ appeals for clients and only earn a fee if we can reduce the value further that what we previously achieved.
The Auditor-Controller will issue a refund for overpayment of taxes for the tax year appealed if all taxes are paid current. If all taxes are not paid current, then you will receive a reduced tax bill with penalties and interest recalculated based on the revised value.
There would be no change in your property taxes and they would remain the same for the filing year. We will file an appeal for the following tax year to seek a reduction.
Proposition 8 reassessments last for at least a year. Property values are reassessed on January 1 of the following year and the assessed value may increase or decrease depending on the market value of your property at that time. It is likely that in a stable to declining market, the assessor will hold the lower for subsequent years until the market starts to show signs of recovery.
We charge a contingent fee of any savings for the first year only with no up-front costs. You pay nothing until your overpayment is refunded or if a revised tax bill is received. At that point, our fee for services is simply a percentage of the reduction in taxes or refunded amount.
Yes. Many of our clients have attempted the process on their own, prior to engaging our service. If you have any questions on the process, filling out the required forms, what information to provide, how the County will value your property, etc, please feel free to Contact Us.