We received the following letter from our County Assessor-Recorder the day before yesterday. At first I was afraid to open it, thinking it was bad news. Well, it did turn out to be bad news … but with every cloud comes a silver lining…
As a result of the decline in value of the local residential real estate market, and, after a careful review of your property’s current assessment, we have determined that the factored base year value of your property exceeds the market value of your property as of January 1, 2008 and your value will be adjusted downward for the 2008/2009 tax year. This review has been done under the Proposition 8 “Decline In Value” program.
This value change will be reflected on your 2008-2009 tax bill which should be mailed in September.
The provisions of Proposition 13 also mandate that the value of your property shall be reviewed on an annual basis. This annual review could restore your factored base year value plus any applicable inflation factors that have occurred as of any subsequent lien date, but can never exceed your protected Proposition 13 base year value plus any applicable inflation factors. If the annual review should show that the market has experienced a further decline, you will receive another decrease in value for that tax year.
The Silver Lining
Despite the badness of this news, we can’t help but be a little cheered at the prospect of lowered property taxes this year. With decreased income but increased everything else, a break in property tax right now seems more important than our property value, because, after all, we won’t be trying to sell our property in this market.
The Rest of the Cloud
But back to the bad part of the bad news: Our adjusted 2008-2009 value is now 37% less than its base value. This is really worrying. We had been thinking about re-financing in the next year or so because our current loan is an ARM (fixed for the first 10 years – so until 2015), but that’s definitely on hold for now.
A few of our major concerns right now are:
- What if the market doesn’t come back up by 2015?
- What if we can’t afford to keep up with all the necessary maintenance due to the inflation and lowered income, resulting in further decline in value?
- What if we need to sell the house for some reason?
We can only hope that everything will work out after a year or two of lowered property taxes. Maybe we should start patronizing Starbucks.