On April 8th, The Garden Island published an article about a new value allocation approach being applied to Kauai condo's. According to the article, "After conducting site visits to all condominium properties on the island, the real property assessment office determined that the allocation of values between building and land for these properties needed to take into account differences in view planes and location within each project to better mirror their market values". This, according a a county news release.
Additionally, I received an email sent to all Realtors from the Real Property Review Officer further explaining, "For 2009, there was a major shift in how the total market value was allocation between land and building. Since land tax rates ($6.90 per $1,000) are lower than building tax rates ($7.90 per $1,000), it made sense - in lieu of a single assessed value and/or single tax rate - to reevaluate this means of allocation. The method utilized in prior assessments is known as “building extraction”, which places enormous weight on the improvements. In trying to be more equitable, the relationship between land values (as derived from vacant comps) and building values (as determined from the replacement cost less depreciation) was examined and applied proportionally to the overall values. The City & County of Honolulu began using these ratios to allocate total value between land and building before they eventually switched to single values. With the Real Property Tax Initiative before the Kauai County Council, albeit deferred for the time being, it is imperative to appropriately account for the value contribution between land and buildings since the recommended tax rates for land and building may have a 3:1 relationship (i.e. $9.00 for buildings and $3.00 for land). Naturally, with the current market conditions continuing to deteriorate in 2009 , I’m sure it is difficult for property owners to see their assessed values above what they believe they can now sell their properties for. Unfortunately, I am required to render the valuations as of a specific point in time using empirical data that was available to me prior to that date.
"In the Garden Island article, there was a small column stating that active listings not subject to distress situation were utilized as collateral data AND that the short sales, real estate owned properties and foreclosures were regarded as indicators of liquidation rather than market value. HELLO! Are these people serious or totally out of touch? The liquidation value IS the market value. Between 30 to 40% of the actual sales are distressed sales and it's the great bargains on Kauai that are finally moving the market. How the assessor can disregard this fact is completely beyond me. I have clients with a lot for sale at $995,000. We have not yet received offers after four months on market, YET, their assessment went up 35% percent for 2009. Adding to the confusion, many appraisals done for lenders are now coming in LOW. Appraisers and assessors are obviously working from a different playbook.
Walter Lewis, a frequent contributor to the Garden Island, published an article entitled, Not a Fair Fight, where he detailed the "kangaroo court conditions" that appear to be the modus operandi of the Kauai County Council and their tax constituency. We would like to see the county taxation reflect the reality of our realty market, not what was true several years ago. Unfair taxes have a way of hurting everyone.
What are the tax assessors doing in your community? If you live in a market that experienced great appreciation, are your assessed values reflecting the current market conditions? Let me hear from you...
Ron Margolis, RA, CDPE, ABR Hawaii Life Real Estate Services 808.346.7095 email: firstname.lastname@example.org