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Foreclosures are closely related to the rise or fall in property taxes. If not handled properly it might lead to increase in taxes although common sense points to the fact that since real estate prices are tumbling so should house taxes. But there are many ways of reasoning.
The appraiser fixes the value of the house in a simple and apparently straight forward manner. The prices of similar properties in the adjacent neighbourhoods are checked and calculations made accordingly.
The distressed sales are at the centre of the controversy. If these are sold in the open competitive market then they are to be included in the calculations. Since the housing bust half the sales in the conventional market are from the foreclosed category.
There are vested interests that do not want to show these sales because it will lead to a drop in taxes – disastrous for the already beleaguered exchequer.
The post of the appraiser had so far been an appointed one. But lately an elected official has been given the appointment – Pedro Garcia. While he admits one rule for Miami Dade County he is not willing to apply it to the entire state of Florida. He focuses on two main points – some of the distressed properties have been so badly mauled that their prices are far below the market rate. Desperate lenders are selling them much less than their real value even in this market. Garcia explained, “Lenders are motivated not by a desire to secure a price reflective of market value but by a need to write off a bad, nonperforming mortgage loan”. This argument seems strong as it is but weak when compared to what happened couple of years ago during the boom. This reasoning was not applied in reverse order – rather the appraisers inflated value of houses reflecting not the true colour of the market but the wishes of the mortgage firms.
Today because of an over supply of distressed units the lenders are pocketing whatever they can. A couple of years ago it was the other way round with an increase in demand for houses. It is just intellectual jingoism to recognize high housing demand but not the other way round.
The greatest fear is that these arguments are dangerous for the market and will not salvage the rot in the market – rather make it worse. It is no accident that Miami-Dade County is recovering faster than other places. This point needs to be noted.
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[...] the market is thick with foreclosed houses two thirds of the surveyed are unlikely to opt for foreclosed units because of the slow dealing process and the hidden high repairing costs. Search Images: [...]
[...] The real estate market in US has crashed with home values plunging to unheard of lows. Foreclosures are a common feature now. In fact, most areas are dotted with foreclosed properties. [...]