Many homeowners receive unsolicited offers for assistance in getting their property taxes reduced by companies purporting to specialize in reducing property taxes. Some are cleverly disguised to look like mandatory bills which if not paid will trigger an increase in taxes.  Not only is it possible to have your property value reassessed and have your taxes reduced due to a decline in market value, it is a requirement that the tax rolls reflect an accurate value of property, both real and personal (By the way, if you think Buildings, Bulldozers and Boats, you will have a good idea of what an Assessor must value).  Homeowners do not need to hire a service to do this.

If you bought your home within the last four to five years, it is likely that your current assessed property value is higher than the current market value of your home. In most areas of California annual reassessment is an assumed, automatic increase in value.  It is not an actual re-evaluation of current market value based on market transactions.

Given the large scale nature of this situation, many counties have simplified the process of getting your property taxes temporarily reduced based on the current market value. A homeowner can generally do the same things property tax reduction services do with just a little effort.  In fact local property owners might even have an easier time dealing with the County. (Local government offices tend to be friendlier with homeowners than consultants.)

First, you may try going in to your Assessor’s Office and just ask for a reduction in Assessed Value.  It would be best to talk to the Appraiser assigned to your area, keeping in mind that you might need to make an appointment.

Alternatively, go through the following steps:

1. Find the Web site for your County Tax Assessor’s Office.
2. Go to the Forms section and look for forms with the words “reassessment request” or “decline in market value.” If you cannot find it, call the office and ask how to get it.
3. Usually the request will ask for an estimate of the current market value of your home, and a list of recent, comparable sales in your neighborhood supporting that value.
4. Contact the REALTOR® who sold you the house and ask them to provide information about comparable sales. Most will be happy to assist you.
5. Find an online valuation site, like www.Zillow.com, where you can get an estimated value and a list of the comparable sales on which it was based.
6. You are trying to support the fact that your property value is lower now than when you purchase it. List legitimate comparable sales which support that argument. 
7. Deliver the form! Allow several weeks, then call and check on the progress of your request. If it is accepted, you have a reduction — for this year. Once you have received a reduction, it is considered temporary.  California’s Proposition 8 requires reevaluation every year and your assessment could return right back to previous assessment levels, but never more than allowed under Proposition 13.  

Regardless of the way you choose to complete the process, you will not pay a fee to an “Assessment Reduction Specialist” to provide a review of your property assessment!©

Rolf Kleinhans is a Broker/REALTOR™ with Recreation Realty Inc./Sierra Cascade Properties in Nevada City, and a Licensed Appraiser.  He also holds a Masters Degree in Business Administration from UCLA, concentrating in Real Estate and Finance and has over 25 years experience in transacting and valuing property.  Actively involved with the Nevada County Association of Realtors (NCAOR), he has held all officer positions of NCAOR including President.  He can be reached at 530-559-5000 or www.SierraCascadeProperties.com.

Rolf Kleinhans is also a Candidate for the Nevada County Office of Assessor 2010.  www.ROLFforAssessor.com.

The commercials show all these people doing nice warm fuzzy family things.  Yet, try to go and get a real estate loan.  Then the obstacle course comes and out, and beyond making you jump through hoops, it feels like you must also jump over flaming pools of oil.  They talk about restructuring mortgages and what they are doing to keep people in homes, and make their statistical presentations to governmental representatives who simply do not have the resources to dig deeply and question the presentations.

From my perspective I find these commercials insulting, particularly as these same banks raise fees, reduce credit lines, restrict lending, arbitrarily and unilaterally changing due dates (this triggers late fees and increased interest rates) and influencing appraisals ( to the downside) all while using taxpayer funds to keep them selves solvent and salaries of top executives (the same ones who steered their organizations into the need for taxpayer money) at high levels.

As a real estate professional, I hear anecdote after anecdote about how the lending institutors are doing anything but helping.  I have also worked on loan modifications with different individuals, and so also have first hand experience.  Rather, I hear about strong arm and delaying tactics, such as better pay or we won’t modify your loan.  Over 9% of the loans on residences in this country are delinquent, and another 4% or so are in default.  That means that over 13% of all loans are some from of difficulty.  This has so far and will continue to significantly impact not only those individuals in this situation but their neighbors and communities.

What if there was a tax policy shift that said for the next 10 years all mortgage interest over 4% was to be taxed at 150% (10 year notes are at about 3.5% as of this writing, and banks are paying essentially 0% to borrow money from the government).  This might certainly influence lending institutions to modify their loans.  I would bet that within 3 months, there would be stability in housing prices and a balance between demand and supply, and  within 6 months, the additional savings in mortgage interest payments would be flowing back through the economy and showing increased savings; both very positive things.

There are notable price differences between these types of properties.  Also noticeable are the significant differences in the condition and quality of these properties. Willing sellers use the “polish the apple” approach, doing there best to make the property present itself in the best paossible way.  Short sellers have some incentive to keep the property neat, but rarely spend any money or significant effort in keeping up a property.  REO properties are usually in some state of disrepair and neglect.

 Of note to buyers is that standard disclosure rules apply to willing sellers and short sellers as they are still the owners.  Lenders have vastly reduced disclosure and responsibility requirements.  The reduction of disclosure and responsibility for the lenders, transfers risk to buyers. 

 Pending single family home sales for Nevada County as of August 10, 2009 are as follows:

While not a scientific study, as I expected there is a significant difference in pricing.  Buyers do require a substantial discount for taking on more risk and lower quality properties.  For more information, see my blog on Things to Think about when Buying Foreclosures: http://rolfkleinhans.wordpress.com/2009/07/14/buyingaforeclosure/

Rolf Kleinhans is a Broker/Realtor™ with Recreation Realty Inc./Sierra Cascade Properties in Nevada City.  Actively involved with the Nevada County Association of Realtors (NCAOR), he has held all officer positions of NCAOR including President, and served at the state level as a Director of the California Association of Realtors.  He has held the appointed position for the Nevada County User Fee Committee (Past Chairman), is currently serving on the Nevada County Sewage Disposal Technical Advisory Group as Vice Chairman, and represents the Realtor’s organization as a member of the Economic Resource Council.  He can be reached at 530-559-5000 or www.SierraCascadeProperties.com.

Seller’s Market: A market which has more buyers than sellers. High prices result from this excess of demand over supply.

Conventional wisdom would say we are in a Buyer’s market at this time.  The levels of inventory, meaning available properties as a percentage of total housing stock (under 3% in Western Nevada County), are generally indicative of a seller’s market.  Buyers are out there trying to buy property.  Often on what are considered good deals there are multiple offers.  However despite a willing buyer and seller, far too often a deal is unable to close,  because the lenders do not want to fund a loan.

Lender’s rules of engagement (yes, it is a deliberate analogy to combat) seem to change day by day (some of my lender affiliates say hour by hour).  Most real estate transactions involve some form of financing and lenders are an integral and necessary part of the process.  For their part, they have over the years enjoyed very steady and mostly secure returns on their loans.  Yes, many lenders are currently having to risk adjust the value of their loan portfolios, but I see strong evidence that their actions are in fact further eroding the value of their portfolios and the real estate markets in general.

For example, some lenders require an appraiser to automatically adjust an appraisal downwards from comparable sales of 3 to 6 months ago.  I would call this undue influence on the appraisal community.  There are new regulations out affecting appraisers and how they are to do business; the Home Valuation Code of Conduct. (HVCC does not allow mortgage brokers to call an appraiser; they must be assigned by a “neutral” third party, called Appraisal Management Companies, because of the fear of undue influence).  This has resulted in out of area appraisers doing local appraisals, which of course calls into question the validity of the appraisal itself. I believe that a requirement or pressure to make an appraisal conform to a principal’s or lenders desires (either up or down) is inherently wrong.

Either way, in the current marketplace, the lenders are in the position of significantly affecting market terms and prices between buyers and sellers rather than being an ancillary part of the traditional willing seller and willing buyer transaction.  It is a Lender’s Market.

Rolf Kleinhans is a Broker/Realtor™ with Recreation Realty Inc./Sierra Cascade Properties in Nevada City.  Actively involved with the Nevada County Association of Realtors (NCAOR), he has held all officer positions of NCAOR including President, and served at the state level as a Director of the California Association of Realtors.  He has held the appointed position for the Nevada County User Fee Committee (Past Chairman), is currently serving on the Nevada County Sewage Disposal Technical Advisory Group as Vice Chairman, and represents the Realtor’s organization as a member of the Economic Resource Council.  He can be reached at 530-559-5000 or www.SierraCascadeProperties.com

Buying foreclosed and/or short sale properties is quite different than purchasing a property placed on the market by a willing seller.  If the willing seller has a good Realtor™ and also chooses to listen to them (very important), then the willing seller usually has an idea about market value and has priced the property to generate interest from prospective buyers.

Foreclosed and short sale properties are available because the purchaser has more debt on the property than current market prices support.  Usually the property is not as well cared for as in the willing seller situation (no surprise here).  The lender wants to get back all their money, accumulated debt and penalties (the value of their note on the books is the sum of all these items, which is obviously more than the property is valued at, or it could have sold)

Many banks start out with this total value as the price they want to market their property at.  Ultimately they reduce their prices to reflect the property in its current condition (remember these properties are usually a little beat up), but this usually takes some time (the longer they sit the more beat up they get).

Writing the offer as a prospective buyer is another place where the willing seller part really helps; willing sellers respond quickly, usually in a day or two.  Lenders frequently do not respond for weeks and even months.  And if they accept your offer they often reserve the right to cancel it at any time if a better offer comes in.  So, any inspection fees or costs expended by a buyer can be for naught (Buyer Beware!)

Lenders often want their own forms used (rather than California Association of Realtors forms which I feel are fair and balanced for both sides of the transaction).  There is a greater risk for buyer’s deposits in these transactions.  The disclosure laws for Lenders are very different as well and, of course, skewed substantially in favor of the Lenders.  There are often surprise closing costs (often in the thousands of dollars) that the banks will say are the buyer’s obligation.

All that being said, there can be values found in foreclosures.  It is a different and riskier process.  Most foreclosures/short sale properties ultimately are listed with Agents and available on the MLS systems.  Those properties that are not yet foreclosed on are announced in public venues as prescribed by law.  Usually the bank gets the property at the foreclosure auction by using a “credit bid” of the amount of the note plus all owed interest, penalties and what not.  If this total amount is a “good” deal, then theoretically the property could have been sold in the traditional manner.

So, if you are in the market looking for an investment opportunity, look for the best deal you can in the MLS systems regardless of it status as a foreclosed property, short sale or willing seller situation.  Nevada County is low on the percentages of foreclosed and short sale properties.  In other areas, particularly those areas where massive building occurred, there are quite a few more foreclosed properties available.  In these areas, the lenders have come to grips with the nature of their properties and have discounted them substantially.  Remember, the best deal does not mean the lowest initial price!

Rolf Kleinhans is a Broker/Realtor™ with Recreation Realty Inc./Sierra Cascade Properties in Nevada City.  Actively involved with the Nevada County Association of Realtors (NCAOR), he has held all officer positions of NCAOR including President, and served at the state level as a Director of the California Association of Realtors.  He has held the appointed position for the Nevada County User Fee Committee (Past Chairman), is currently serving on the Nevada County Sewage Disposal Technical Advisory Group as Vice Chairman, and represents the Realtor’s organization as a member of the Economic Resource Council.  He can be reached at 530-559-5000 or www.SierraCascadeProperties.com.

This race is always a fun event, starting with the kids parade (on bicycles) and ending with the Pro Racers.  It looked to be another small town event with a good but not huge turnout.  And then with one tweet from @lancearmstrong (7 time tour De Fance winner Lance Armstrong’s twitter moniker) that changed.  Now we had Lance Armstrong, Levi Leipheimer (3 time Amgen Tour of California winner), and Chris Horner (looking to join Lance and Levi on the Astana Team for the TDF), racing in our little town here.  Lance and Levi flew in from Aspen jsut for the race!

This has changed this race for the foreseeable future and probably fiscally helped a whole small town out for years to come.  It looks like Nevada City will be a very strong contender for a leg of next year’s Tour of California.  And that means activity and dollars for Nevada County, Grass Valley and Nevada City.  So thanks to the riders, but especailly the three riders who did so much more than race in the streets of Nevada City…they may have left a little gold behind.

$300,000 sale price (Median Price of a single family home in Nevada County, California for the month of May, 2009)

6% total commission paid by the seller = $18,000
Half to the listing agent =$9,000
Half to the agent who represented the buyer = $9,000

What is not common knowledge is that the agents  have a “split” of  their commission two more times after the deal closes.  First, agents split their commission with their broker.  Commission split arrangements between agents and brokers vary widely.  Often times it’s something like a 50/50 split for newer and less experienced agents, and up to a 90/10 split for the most experienced and productive agents.  Using an average split of 70/30 between the agent and their broker.
$9,000 total commission
70% to the agent = $6,300 (Listing Agent or Buyer’s Agent)
30% to the broker = $2,700

Now, the agent gets to split that $6300 with their business partners, Uncle Sam and California.  Let’s use a 30% split which could be low. (Since agents are independent contractors, they are also subject to the self employment tax of 15%)

Here is that number: $6,300 minus 30% ($1,890) = $4,410 left after taxes)

From the $4,410, the agent is also paying the other business fees associated with being a real estate professional.  This includes E&O insurance, personal marketing, property marketing, dues to the Department of Real Estate and the agent’s Board of Realtors, fees for MLS access, required continuing education, office supplies, rent or desk fees, gas, cell phone, website, etc.

Remember the agents do not receive one thin dime until the Seller is satisfied, the Buyer is satisfied and the deal actually closes.  Agents put out lots of time and effort and money before they get paid anything.  How many sellers and buyers would want to pay hourly fees as services are provided, like they do for legal counsel?  The original $18,000 in total commission doesn’t seem like such a large fee now does it?

Locally, here in Nevada County, sales of existing family homes are stable and so is inventory of available homes(at least stable for this new paradigm).  Of interest to me, is the fact that average and median prices are creeping up significantly.  I do not think that  prices are rising, but rather that higher priced properties are now selling.  We have seen the lowest end of the market moving rather briskly.  There have been multiple offers on the perceived good values. 

It appears the perception of good values is expanding. Given interest rates (have come down in last few days) at compelling levels and the reduction in prices over the last two years, there are some great values out there in the $400k to $500k range.  It seems like buyers are feeling that way…they are voting with their dollars.  In this situation, I think I will have to listen to Main Street and how they perceive value.