If you own real estate on Lummi Island, Lake Whatcom, SuddenValley, Geneva or south of Lakeway Drive in Bellingham, you recently received a notice from the Whatcom County Assessor that your property is worth more than it used to be. Since real estate in these areas was last assessed prior to 4 years of rising real estate prices, it’s not surprising that the Assessor says it is worth more today than it was in 2004. On the other hand, for the last few months you have been reading that real estate values in Bellingham and Whatcom County are falling, so why has your taxable value gone up 50%, 60%, 70% or more? The next big question is – does that mean your taxes will go up by the same percentage? And the last question is – what can you do about it?

Let’s start with the Why. The law requires counties to determine the “market value” of real estate on a regular basis for the purpose of levying taxes. In Whatcom County, ¼ of the county is assessed every year. This system means that if there have been major market shifts, the changes can be huge over a 4 year period. But values have gone down over the past year, right? Perhaps. Generally speaking, homes in the upper ranges and raw land have dropped over the past year. Have they dropped to 2005 levels? In some cases, yes. On the other hand, homes in the lower price ranges, particularly in some areas, may have maintained their gains. The number of homes sold has also dropped over the past year, giving assessors fewer choices of comparable sales for real estate that is somewhat atypical.

Next Question: How much will your taxes increase? At this point, no one knows. Taxes for things like bond issues, which are for specific amounts, will not increase as assessed value rises. The percentage collected will change so that the same amount is collected based on the new total assessed value of all real estate in Whatcom County. The general fund taxes are a bit more complicated. Counties are limited as to how much additional property tax they can collect in any year over the year before, not counting the additional taxes gathered from new construction and development. Theoretically, actual taxes should go up considerably less than assessed valuse, but my experience is that a jump in one typically brings a jump in the other.

Last Question: What can you do about it? You can appeal, and if you can show that comparable property sales do not support the new assessed value, it can be reduced. The first step is to call the Whatcom County Assessor’s office at 360-676-6790. If the assessor’s analysis of your property is incorrect, they may be able to resolve it immediately. If they can’t help, you need to file an appeal petition with the Board of Equalization. Appeals must be filed on forms available at either the Whatcom County Council office or the County Assessor’s office, both in the courthouse at 311 Grand Ave in Bellingham. Appeals must be filed no later than July 1 of this year or within 30 days of the date on the change of assessment notice. They must be returned to the County Council office – a phone call or letter does not constitute filing an appeal. You will be notified when your hearing date is set.

I have successfully argued before the Board and been granted a roll back in assessed value of a property. The key is to provide the Board with the tools they need to make the decision you want. They do not have the power to reduce the assessment for any reason other than evidence of real estate values which would support the value you are claiming. Comparable sales are the best because value was established by the sale. Evidence of real estate comparable to yours that is currently listed at a lower price than your assessed value could also be of help. Comparable properties need to be as close to yours geographically and in basic characteristics as possible. Your evidence needs to be in writing and to the Board at least 5 days before your hearing so that they have a chance to review it (it can be submitted separately from your appeal petition). This will be much more effective than just showing up and telling them all about it.

The Whatcom County Assessor’s office has an excellent website at http://www.co.whatcom.wa.us/assessor/. It has complete instructions on how to go through the appeal process as well as explanations of how assessment values are established and taxes are determined. If you need information on properties currently for sale or sold, go to our website at www.JohnsonTeamRealEstate.com, choose Recent Home Sales, and map your neighborhood. There is even a calculator that will estimate the value of your property if you enter the address. If you still need some help in deciding whether to appeal or putting it together, don’t hesitate to contact us at info@JohnsonTeamRealEstate.com or 360-527-8766.  We’ll do anything we can to help.

The big news of the morning beside the analysis of the presidential debate was the Fed. The FOMC dropped the funds rate .5% to 1.5%. This drop was a coordinated move world wide.

An important note to remember is that the FOMC does not control the mortgage interest rates directly as they are based on the mortgage securities bonds. While the FOMC does not control mortgage rates, they do influence them and time will tell how the traders/markets will react to the lower rate.

The FOMC is set to have another meeting on October 28th and 29th and from the sounds of it another rate cut is not out of the question.

Now it’s a waiting game to see how markets react, as of now mortgage rates remain relatively unchanged by the news, but as we all know now more than ever, that can change!

Just when we think we have the income tax laws regarding real estate figured out, the federal government has to go and change them again!  This time the changes come as part of the 2008 Housing and Economic Recovery Act (HERA), H.R. 3221, an attempt on the part of government to help individuals impacted by the current mortgage crisis without spending money to do it.  It’s called “revenue neutral”, which means that they have to collect more money from somewhere to pay for it. 

The additional collection relative to real estate comes from a change in the way profits (capital gains) from the sale of a primary residence are (or are not) taxed.   Currently, if a person sells a house for a profit (capital gain) after living in it as their primary residence for 2 of the past 5 years, there is no capital gain tax due on $250,000 of the gain for a single person or $500,000 for a couple.  They are free to do whatever they want with the money and there are no age restrictions.

Americans are a creative people, particularly when it comes to avoiding taxes, and during the recent boom, this tax provision provided an incredibly easy way to make money.  Let’s look at a simplified example:

A couple owns a house (their primary residence), a vacation home and a rental house. They sell their primary residence, take $500,000 in tax-free profit and move into their rental house.  They live there 2 years, sell it, take $500,000 in tax-free profit, buy a home where they want to retire and move into their vacation home.  They live there 2 years, sell the former vacation home, take the tax-free profit and move into their retirement home.  3 sales, no capital gain tax.

The sale of a former rental does have some tax implications regarding recapture of depreciation, but that has been minimal relative to the potential for gain.

Congress has decided that this scenario does not fit the original intent of the law, which was to eliminate capital gain taxes on the increase in value of a person’s home.  As of January 1, 2009, there will still be no capital gain tax due on a profit generated by the sale of one’s personal home where they have lived for 2 of the past 5 years, with the following exception:  If that home was converted to a personal home from a rental or vacation property, capital gain tax will be due on that percentage of the gain equivalent to the  percentage of time that the house was used other than as a primary residence since January 1, 2009. 

For most homeowners, this change will be of no concern, but many knowledgeable people have incorporated this tax provision into their financial planning .  It has always been important to talk with your financial advisor or accountant  before making a decision to sell property, and never more so than now.

If you are currently thinking about selling and curious what your Bellingham or Whatcom County home maybe worth visit our website at www.JohnsonTeamRealEstate.com