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Info & links; why taxes vary so greatly

Posted by Harry Pritikin on Wednesday, 10 April 2019, at 7:58 a.m.
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In response to 143216: Prices listed way above assessment?, posted by Eric H on Friday, 5 April 2019, at 6:53 a.m.

Here is a link to information on property tax exemptions with some insights as to why the taxes may fluctuate in the same neighborhood. Copy & paste it into your browser.

What the county assessed a property for several years ago has nothing to do with what the lender will approve today. A lender will order an appraisal and pay no attention to the assessed value. Please remember, assessed value and actual market value are not the same. Assessed value is set by the county to determine how much they will charge the owner in property taxes and not for the purpose of determining what the property should sell for. The country Assessors Office and the real estate community are mutually exclusive. Actual market value is what somebody is willing to pay for the property today. The assessed value is the amount the Assessor assessed the property for on the date he assessed it and it does not change until the next re-assessment. They go by what they think it cost to build the structure plus what they think the land was worth. Items like driveways and large concrete or asphalt parking areas would not be included in these figures. Also, they do not take views and location into consideration. It can then can take them 5 years or more to get around to any one particular piece of property for re-assessment purposes. During that time the actual market value can rise and/or fall but the assessment will stay the same until the property is re-assessed. That's why assessed value should not be used to determine the amount of an offer to buy property.

Here in Hawaii the amount of the assessment does not change each time a property sells like it does in California. Here we have to wait until the Tax Office gets around to re-assessing the property. Between 2003 and 2006 the market escalated at a rate that far outpaced the ability of the Tax Office to keep up. Since then, between 2007 and 2011, the market collapsed just as rapidly. The market has again been steadily rising since 2011. The Tax Office has not been able to re-assess fast enough to keep pace with these fluctuations and the assessed value remains the same until the Tax Office gets around to re-assessing the property. When they do, if the property is a rental or investment property, the assessed value will be changed base only roughly on current sales in the area. They also factor in the varying costs of building materials and other factors that make the equation quite complicated. By the time they get around to setting a value on an individual piece of property, the values in that neighborhood could have changed considerably. As an example, many homes currently have assessed values that are more than the buyers paid; but in today's market they would sell for more than they are assessed. Assessed value is for County property tax purposes only, is not meant to be used as a measure of the market value of a property, nor should it be construed to do so. County assessors are not professional appraisers. Only a full appraisal can determine the actual market value of a property.

For your principal residence, the assessed value can only go up 3%/year. Also, Hawaii County has generous deductions for principal residences. That information follows. Property taxes on a home that is not the owner's principal residence will be more than double what it would be if the property was the owner's principal residence.

Mahalo, Harry


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