If you haven’t heard about omitted property taxes yet, let me be the one to catch you up to speed. Omitted property taxes happen when an assessor finds a property has improved in some way and then they raise the value to match the improvements. They then go to collect back property taxes. I have heard they can go back the current year plus five years to collect back taxes.
Why haven’t you heard about it? It’s been picking up steam in the last couple of years. According to the Portland Tribune:
Some counties have taken up the practice with gusto. In Clackamas County, for example, the assessor sent out just 17 notices for omitted property taxes in 2012. But in the first half of 2017, the office sent out 496 such notices, a more than 50-fold increase.
In Washington County, the assessor’s office sent out 480 notices in the first half of 2017, more than its total for all of 2016.
While property values have gone up close to 10% a year for the last few years, the Oregon Constitution limits the rate of growth of property value subject to taxation to 3% a year. This may be why assessors are pushing to collect on omitted property taxes. Multnomah County made a grab for property taxes a couple of years ago using ADU’s (granny flats) as an excuse to raises property taxes sometimes quadruple.
How are the assessors learning about these home improvements? Online through posts on RMLS, Zillow and the like. Remodeled homes and flips are the easiest targets. And while most people turn assessors away when they com knocking on the door, an appraiser said he avoided a bigger hit by letting the assessor in. He hadn’t done any expensive upgrades to warrant much of change. If the assessor can’t come in, they have to guess. I would assume they might guess high, don’t you?
So how does this affect you as a buyer? If you are buying a remodeled home or a flip, don’t assume your taxes will stay where they are. Also, don’t buy a home just because taxes are low, that alone may cause the tax man to check out RMLS.
How does this affect you as a seller? I have heard different opinions on if they can go after the seller as well after close but I’m not sure.
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