In Riverside, scant relief on tax bills

So the boarded-up, foreclosed house across the street finally sells at a fire-sale price, saddling the entire block with a new reality: Prices are falling, and so are property values up and down the block. Right? And that means property taxes on that block should be reduced accordingly, right?

Er, wrong, according to the assessor’s office in Riverside County. For the purposes of property tax assessment, the office does not count all foreclosure resales as true comps. To be clear, I’m not talking about trustee auctions on the courthouse steps; I’m talking about the second foreclosure sale, when the bank lists the house and sells it on the open market.

Linda White, chief deputy assessor in Riverside County, tells L.A. Land that, when trying to determine the extent to which property values are falling, the county sometimes concludes that the sale of a distressed home should count less than other sales.

“We never discount them completely,” she said, referring to foreclosed houses that are sold. “They would not be given as much weight as a non-bank-owned transaction.”

This surprised me. I figured a sale is a sale. A comp is a comp. Not so, says White: “It’s not always considered an arms-length transfer. The banks are dumping the properties; they’re not even looking at the market value sometimes. It would be looked at more carefully.” She added, “We try to be fair.”

The issue came up in an e-mail from a reader who was angry when the county told him his property value had not been damaged as much as he thought it had been by all the recent foreclosure sales in his neighborhood, and thus his taxes would not be reduced accordingly. The reader wrote:

“Riverside County is valuing my house based on non-bank-owned, non-foreclosure properties. In normal times, that would make sense. In normal times, bank-owned properties don’t set the standard but are an exception to the norm. However, in January of this year, the month when the values were determined for my home, almost all of the homes that sold were bank-owned. Therefore, if one only looks at non-bank-owned sales, they represent a tiny fraction of overall sales, and they distort the fair value of the home far above what it should be worth, giving more tax money to Riverside County. Meanwhile, the people that kept their homes and didn’t walk away are not only holding homes worth 60% of their original purchase price but are now paying taxes well above what their homes are fairly worth.”

-- Peter Viles