Keep calm and enjoy the ride as the tide rises
April 2 – On April 6, 2021, “Saturday Night Live” ran a racy fake ad for Zillow, the website that allows users to anonymously search for information – including estimated market values - for almost any home in the United States. United.
It was a timely skit. People were so bored during the height of the pandemic that they had fun poking around in the home values of friends and neighbors. Or, if they were in a hot real estate market, they might have liked to see the value of their own home increase at a staggering rate. A house is a big investment, and it’s fun to go online and say “Hey, our net worth just went up by $20,000!”
It’s less fun, however, when your home’s gain in value shows up on your county assessment notice.
Residents of Minnesota received these notices in mid-March, and we suspect many people immediately got a bad case of sticker shock. In the Southeast region, the estimated market value of homes increased by 20% or more, and in Olmsted County, the value of commercial properties increased by 15%.
Such increases can scare homeowners, who immediately conclude that a 20% increase in the value of their home will result in a 20% increase in their property taxes. This would mean that a relatively modest house in Rochester, with property taxes of $3,000 a year, would have a tax increase of $600.
Luckily, those fears are probably overblown, and we offer this advice to homeowners: Calm down. Property taxes are complicated, but at the risk of oversimplifying, we’ll sum up the current situation by saying that a rising tide lifts all boats.
Single-family homes, apartment buildings, commercial properties and farmland have all increased significantly in value over the past year. Additionally, Rochester and the smaller communities surrounding it continue to add new subdivisions, townhouses, high-end apartment buildings and commercial developments, all of which add to the total estimated market value of property in Olmsted County.
This increase in value, however, does not create a tax windfall for the county, as local government spending is not based on the amount of tax revenue generated. Quite the opposite, in fact. Later this fall, the county will estimate how much tax revenue it will need to meet its obligations in 2023, and property owners will then be taxed in proportion to the value of the property they own in order to generate the necessary revenue.
This means that many tax scenarios are possible. If the county’s estimated expenses for the next year increase by 8% and the estimated market value of your home has increased by 20%, you will likely face an increase of about 8% in your property tax bill. .
On the other hand, if your home’s value has increased less than that of a typical home, you may see no increase or even a decrease in your tax bill, especially if the county adds new homes and new owners to their property taxes.
Still confused? Maybe that will help. If the current housing bubble bursts next year and home values drop 30% almost overnight (like in 2007), you wouldn’t see a 30% reduction in your property taxes. The county would still need to plow roads, staff county parks, pay sheriff’s deputies and provide social services. That’s why there are years when some homeowners see their estimated market value go down, while their tax bill goes up. The county must pay its bills, regardless of the value of the properties the previous year.
The reality is that we won’t know the true meaning of the 2023 assessment notices until the county sets its budget for next year and sends in proposed tax notices in November. However, if you believe an error has been made in the valuation of your property, now is the time to act.
And now we mean immediately.
The first step is to contact the assessor, which in Olmsted County can be done by calling 328-7670. If you still have concerns after making this initial contact, you will need to attend a meeting of the Local Appeals and Equalization Board, which will be held April 20 in Olmsted County. The process is outlined on the back of your Notice of Assessment, as are other options. you have to appeal an appraisal.
You will also want to check that you receive all of the exclusions and deferrals that you may be entitled to, including the Homestead Market Value Exclusion, Disabled Veterans Exclusion, and several others listed on your notice of assessment. . If you have questions about these exclusions, the county assessor should be able to help you.
While no one likes a tax hike – especially at a time when inflation is skyrocketing – we point out that Minnesota consistently ranks at the top of all quality of life rankings. We love our well maintained parks. We want our roads cleared within hours of the snow stopping. We want our first responders to be well trained and well equipped. We want our students to learn in safe and modern classrooms.
These things can’t be accomplished cheaply – but we also point out that while Minnesota’s property tax burden is the 18th highest in the nation, the typical Minnesota homeowner enjoys a lower property tax rate than that of our neighbors in Iowa, Wisconsin. and South Dakota.
Consider that the next time you scour Zillow for a four-bedroom backpacker in Madison.