Did your property value shoot up this year? Here’s why
It’s an easy enough thing to ignore when you see it in the mail:
A simple postcard or an 8 1/2 x 11 sheet of printed paper with some boring-looking numbers on it. But with a second glance, the numbers on your annual property tax assessment notice might have given you pause this year.
For some, those numbers went up by tens of thousands of dollars.
It’s not uncommon for assessed values to go up each year, but a combination of factors have significantly driven up the sale price of homes in the past year. And the impact of those higher prices is hitting assessed values as well.
“The cost of homes has skyrocketed not only on the construction side but on the sales side,” said Chris Lilla, director of equalization for Minnehaha County. “Typically, in past years, say the market goes up 3 to 4 percent annually. This past year alone … the county as a whole increased 5.64 percent.”
The more your home is said to be worth, the more you’re liable to pay in property taxes, though assessed values don’t directly determine the amount of taxes paid.
Here’s a breakdown of how it all works.
How are properties assessed?
Assessments are done by the county Department of Equalization, so the process looks a little different in Minnehaha County than it does in Lincoln County.
Essentially, though, the goal is the same everywhere: figure out what a property is worth.
That’s done by looking at a number of factors, including:
- What it would cost to build the home new.
- What the land itself is worth.
- Any depreciation if the home has aged, been damaged, etc.
- What similar properties are selling for in that specific neighborhood or geographic area.
- What you could reasonably expect to sell the property for in the current market.
All those factors are plugged into the county’s system for assessment, and an assessed value is calculated.
The goal is to hit an assessed value that’s 85 percent to 90 percent of the price for which a property would sell. Countywide, assessed values as a whole can’t be lower than 85 percent of sale prices, according to state law.
How does the number on the notice relate to what I pay in taxes?
Here’s where it really varies depending on where you live. The total amount of property tax to be collected is set by local governments such as a city, county and school board.
That amount is then divided by the total taxable value to determine the mill levy, which is the amount of money owed on each $1,000 of property valuation.
What you owe depends on your assessed value, though it’s not a direct comparison. Taxable value is a percentage of assessed value as determined by calculations from the state Department of Revenue.
What’s different this year?
A hot real estate market paired with low inventory means homes are selling for higher prices now. Because assessors look at all the sales in their counties, those higher sales prices are driving up assessed values of homes.
In Lincoln County, some areas were hit harder than others. Tea, for example, is seeing a record number of new homes being built. Homeowners there say they saw increases in the $20,000 range all the way up to $70,000.
“Tea was ultimately our biggest impacted market adjustment,” said Karla Goossen, director of equalization for Lincoln County.
In Minnehaha County, some people may have seen big changes because assessors had a more specific, refined way of determining values in 2020 compared to previous years.
In past years, Minnehaha County assessors were comparing properties against other properties in a broad geographic area. New software allowed the county to get more specific this year.
That means a house that previously was compared to 2,600 other properties was now in a pool with only about 700.
“Before, we had neighborhoods that had million-dollar homes to $90,000 homes,” Lilla said. “Now, we’ve put everybody in their own car, if you will … it should be much more fair.”
What if I disagree with my assessed value?
This is the week to do something about it. There’s an appeals process going on now through the county. You can find more information by going to your county’s Department of Equalization website.
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