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How to Compute Property Tax Base for Short Sale Properties

I decided to include this email in my blog site, because I believe it answers a very valid question with regard to how the new property tax base is computed by the San Luis Obispo County Assessor's Office when a buyer purchases a short sale.

Thank you, Beth, for your great question!

"Ms. Cox,

Thank you for the interesting article explaining short sales. One of the things I am concerned about is the property tax base for a home that has been sold short. Do you have any information about what that tax would be based on? Or, in the alternative, can you suggest someone I might contact in order to find out so that I can calculate all my expenses prior to a purchase? Appreciate the information and the very informative website.

Beth"

Paper Money Homes

"Good morning Beth,
I am so glad you found the short sales article interesting... It is nice to get feedback from readers.
If I am understanding your question correctly, you are asking how you would determine the new tax base if you were to purchase a short sale or REO (bank-owned) property.
My understanding is that the tax base on the newly purchased property is always based on the Fair Market Value Appraisal done by the County Assessor's Office after the sale has occurred. If that appraisal comes in reasonably close to the sales price, then the new tax base would be adjusted down to the sales price.
If recent sales in the area for comparable properties are higher than the sales price, the Assessor's Fair Market Value Appraisal may come in higher than the sales price, and the Assessor's Office may decide that the fair market value is actually slightly higher, and the taxes would be based on that. A general rule of thumb is 1.25% x purchase price. So, a $300,000 sales price would compute into $3750.00 a year or divided by 12 = $312.50 a month.
If the home sold two years ago for $500,000 but now you buy it as a short sale for $300,000, the taxes would actually go down to the $3750.00 or some figure slightly above that.
In my experience, most short sales and REO's are very good deals, but the lenders don't like losing money so they don't give them away. To encourage buyer traffic and multiple offers, the short sales and REO's are usually listed a little below market value but not outrageously so. They, too, do their own appraisal of sorts (sometimes just a drive-by), consult a Realtor for a Comparative Market Analysis and then come up with a list price that they think will generate a quick sale.
That being said, I always suggest that clients confirm any advice I give with the appropriate authority, which in this case would be the San Luis Obispo County Assessor's Office. You can reach them online at http://www.slocounty.ca.gov/Assessor.htm or by phone at (805) 781-5643.
If I can be of any other service to you as far as questions, sending you short sale and REO listings or recommending a lender, feel free to email or call me.
Thanks much for visiting my blog and website!
Best regards,
Sherry
(805) 235-0234 (Cell)
P.S. Referrals are the heart of my business and very much appreciated!
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