Welcome back to On the House. We took a brief hiatus for the Thanksgiving holiday but are now back in business. We hope that everyone had a great extended weekend and that you were able to spend time with family and friends.
I had originally planned to chat about structured sales until I attended a seminar on bankruptcy. By the way, the structured sale is a fascinating vehicle and something about which everyone should have some understanding. However, there was something about the bankruptcy seminar that was very unsettling and, consequently, the inspiration for the topic today. What follows is directed toward my fellow realtors but is applicable for anyone that is in a position of trust.
First of all, the subject matter itself was daunting. We’ve all heard of the different types of filings that exist but do we really understand them? Do we know the difference between Chapter 7, 11, 12 (yes, there’s a Chapter 12) and 13 bankruptcies? Which one is a liquidation versus a reorganization? Which one is a business or an individual reorganization? Now, the answers are discernible but are they a part of our daily vocabulary? They are not.
It is at this point in the seminar that I became uneasy. The room was full of real estate professionals asking how to best advise their clients about the structure and disposition of a bankruptcy. Even more disquieting were the responses from the speaker; a lawyer who had been practicing law for nearly 30 years. There was seldom a yes or no answer. Most answers were conditional. Most answers had to be qualified. I was left with the impression that every filing was unique enough to rule out any definitive answers.
The only correct posture here for the real estate professional is to give no advice at all. In our challenged market we’re approached daily with the advice that we have to bring more value to the table if we’re going to be viable. We’re told that our survival depends on it. At the same time, our risk management experts tell us to avoid such behavior. We exist in a litigious environment walking a fine line between service and exposure.
The risk management people are right. When asked for advice about anything relating to legal or tax questions the only correct and honest position to take is to tell your client to seek that advice from a licensed professional in that field. I get approached all the time by friends and clients for advice on everything from how to manage an estate to where to make prudent and profitable investments. That last one always makes me smile. I mean, you’re talking to the guy who invested in Gardenburger ™ when it was at 18 ¾.
The final word here is to do what you know. Provide that market analysis. Direct your client to an attorney or CPA. Be available to assist in the marketing of the home if mandated by the other professionals. Don’t give legal advice. Don’t step out of your area of expertise. It’s entirely possible that you are putting yourself in danger and damaging your client as well. There is no upside here.
Once again, thanks for reading this post. I welcome your input on this or any other subject. I can be reached at gary@vppihomes.com or http://www.vppihomes.com
As always, this information has been… On the House.
Showing posts with label tax. Show all posts
Showing posts with label tax. Show all posts
Monday, November 30, 2009
Friday, November 6, 2009
Taxes, Taxes, Taxes!!
Welcome to On the House and our first post.
Well, it’s tax time and consequently, the subject of the day. As you know our tax year is based on a fiscal year that begins on July 1st and ends on June 30th of the following year. We are now looking at tax statements that cover 2009/2010. Statements are delivered in October and the payment is due on November 15th.
Now, I’ve been paying property taxes for over 25 years and I still pause when I read my statement. There are two values represented there. One is the real market value (RMV) and the other is assessed value. The terms are not unfamiliar but what has always puzzled me is just how the assessed value was derived from the RMV. I’ve always wondered just what formula was used to establish assessed value. A quick call to the good folks at the Multnomah County Assessor’s office was very enlightening. It turns out that, with the exception of new construction, the assessed value is not derived directly from the current RMV.
Let’s journey back to 1997. Measure 50 was passed and everything was set in motion. At that time the assessors turned the clock back to 1995 and took the RMV of record and used that figure to establish the base value of the home. They applied another 10% discount to that value and the new assessed value was determined. That process applied to all existing residential property in Multnomah County. From that point on there was a provision that the assessed value could be increased each fiscal year by a factor of 1-3%. Typically you’re seeing the increases right at the upper end of that range. There is also a provision for what is called “exception value”. This allows an additional tax increase for major remodeling or upgrading to the home.
There is a different formula for new construction. The assessors apply the “changed property ratio” to determine assessed value. They take the sales price of the home and multiply that figure by .5515 and the new base value is established. The ratio is adjusted every year so that figure applies to 2009/2010 only. From that point on the rules regarding the permitted increase limits apply.
One other piece that causes confusion is the actual dollar increase itself. I looked at my statement and my assessed value only went up $6490.00 but my taxes went up $271.91!! To understand what is happening here we need to look at the millage rate. The millage rate is the percentage that is charged for every thousand dollars of assessed value. Right now we’re being charged $21.7866 for every thousand. A home assessed at $100,000.00 would owe $2178.66 in annual taxes. Bear in mind that this millage rate is adjustable as well as the assessed value. Last year, for example, it was $21.1840 per thousand. This increase in millage rate is the one to watch. The assessed value can remain the same year to year and the taxes can still increase with an increase in the millage rate.
The final question that comes up concerns challenging the tax. There is an avenue to do this. You can apply to the Board of Property Tax Appeals (BOPTA) before the 31st of December of this year. You can get petition forms at http://www.oregon.gov/DOR/PTD/BOPTA.shtml or go in person to the county office and get them from the county clerk. It’s an interesting process in itself and beyond the scope of this blog. If you’re interested in pursuing that process there is information that you will need to mount an effective challenge. Contact me at gary@vppihomes.com and I’ll help you through it.
That’s my overview for today. I welcome input in any form. I envision this blog turning into a Q an A forum and look forward to your responses.
Until next time, the information is… On the House.
Well, it’s tax time and consequently, the subject of the day. As you know our tax year is based on a fiscal year that begins on July 1st and ends on June 30th of the following year. We are now looking at tax statements that cover 2009/2010. Statements are delivered in October and the payment is due on November 15th.
Now, I’ve been paying property taxes for over 25 years and I still pause when I read my statement. There are two values represented there. One is the real market value (RMV) and the other is assessed value. The terms are not unfamiliar but what has always puzzled me is just how the assessed value was derived from the RMV. I’ve always wondered just what formula was used to establish assessed value. A quick call to the good folks at the Multnomah County Assessor’s office was very enlightening. It turns out that, with the exception of new construction, the assessed value is not derived directly from the current RMV.
Let’s journey back to 1997. Measure 50 was passed and everything was set in motion. At that time the assessors turned the clock back to 1995 and took the RMV of record and used that figure to establish the base value of the home. They applied another 10% discount to that value and the new assessed value was determined. That process applied to all existing residential property in Multnomah County. From that point on there was a provision that the assessed value could be increased each fiscal year by a factor of 1-3%. Typically you’re seeing the increases right at the upper end of that range. There is also a provision for what is called “exception value”. This allows an additional tax increase for major remodeling or upgrading to the home.
There is a different formula for new construction. The assessors apply the “changed property ratio” to determine assessed value. They take the sales price of the home and multiply that figure by .5515 and the new base value is established. The ratio is adjusted every year so that figure applies to 2009/2010 only. From that point on the rules regarding the permitted increase limits apply.
One other piece that causes confusion is the actual dollar increase itself. I looked at my statement and my assessed value only went up $6490.00 but my taxes went up $271.91!! To understand what is happening here we need to look at the millage rate. The millage rate is the percentage that is charged for every thousand dollars of assessed value. Right now we’re being charged $21.7866 for every thousand. A home assessed at $100,000.00 would owe $2178.66 in annual taxes. Bear in mind that this millage rate is adjustable as well as the assessed value. Last year, for example, it was $21.1840 per thousand. This increase in millage rate is the one to watch. The assessed value can remain the same year to year and the taxes can still increase with an increase in the millage rate.
The final question that comes up concerns challenging the tax. There is an avenue to do this. You can apply to the Board of Property Tax Appeals (BOPTA) before the 31st of December of this year. You can get petition forms at http://www.oregon.gov/DOR/PTD/BOPTA.shtml or go in person to the county office and get them from the county clerk. It’s an interesting process in itself and beyond the scope of this blog. If you’re interested in pursuing that process there is information that you will need to mount an effective challenge. Contact me at gary@vppihomes.com and I’ll help you through it.
That’s my overview for today. I welcome input in any form. I envision this blog turning into a Q an A forum and look forward to your responses.
Until next time, the information is… On the House.
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