By Jean Verlich: CNJ News Editor
Curry County property tax bills are being mailed this week, and residents who purchased a home since 2005 may be in for a shock, county tax officials said.
The reason: a new property assessment system based on market value.
Most people who bought a house in 2005 built in the last 10 years can expect “a pretty modest jump” in their taxes, Curry County Tax Assessor Randy Williams said.
“They’re going to be a little higher than they were,” he said. “Anybody with a house built in the last six years will have a somewhat higher tax bill,” Williams said.
The 2006 tax year is the first to reflect the new system, Williams said. Now when homes are sold, the sales price is disclosed to the county assessor by transfer affidavit. The figures are not public, but used by the assessor only to determine fair market value, according to Williams.
A letter sent to Clovis real estate agents by the Curry County Assessor’s office said “some properties that were sold in 2005 could see a 70 percent or more increase in taxes over what they were.”
“People who are going to be the most affected are the ones (who) bought a brand-new house in 2005 because we were a year behind (implementing the new system) and it was built in 2004,” Williams said. “They’re going to be the ones that get the biggest jump.”
Under a new state law, the price a home sells for is provided to the county property tax assessor, who must assess the tax at no lower than 85 percent of market value.
In the past, the sales price wasn’t usually known, which made it difficult to determine market value for assessing, according to Williams.
“The market started to grow faster than we could keep up,” he said.
In the past, the assessor would “get information any way we could get it,” Williams said, often from real estate agents or homeowners. The price one home sold for in a neighborhood would then be used to determine values for other homes.
“It was hit or miss,” Williams said
Williams said the goal is to bring property up to 95 to 97 percent of market value, he said, although some communities are going up to 100 percent.
The new assessment system only goes into effect for homes sold since 2005, Williams said.
Otherwise, by state law assessments can’t be raised higher than 6.1 percent every two years, Williams explained. The cap is intended to help owners of property, such as those in Santa Fe County, whose values rise significantly over a short period of time.
Assessments were mailed out in May so homeowners who paid attention should be prepared, Williams said. But many don’t, he said, and others have their finance companies escrow funds with their mortgages. They’ll see increases when they receive their new payment schedules for 2007, he added.
According to Williams, the new law was enacted in New Mexico as part of a property sale disclosure program similar to those in surrounding states.
“If we could get all those sales, we would be closer to either having everybody at 95 percent or everybody at 90 percent,” Williams said.
The county should have implemented the new methodology in 2004, but for various reasons, including the Base Realigment and Closure process that impacted Cannon Air Force Base, didn’t until the 2006 tax year, Williams said.
Houses built in 2004 went on the market undervalued, he said. When they sold in 2005, they had to be at market value.
“When we had (a house) appraised, we were still working on the old system,” Williams said, “where we tried to keep everything at an equitable rate and we probably didn’t have that high enough. “
For a $500,000 home, for example, the taxes can be an additional $1,250 under the new system. Williams said the initial 2004 assessment could have been $350,000 or even $400,000.
“Even if we were (at) $400,000, it’s still a $100,000 increase on that house. So your taxes are going to take a considerable jump.”
For homeowners in that price range, Williams sees the new tax bill as more of an annoyance.
“Most of the people that can afford that kind of house, they’re going to be aggravated, but most of them can afford to pay it. It’s the people that are in the lower income stuff (who) are stretched out there as far as they can go when they bought it.”
After this painful transition, however, it should be a more realistic system.
New houses sold will be appraised at market value “right off the bat so there’s not going to be any lag time between when it’s built and when they actually bought it,” Williams said.
For people who escrow their property taxes with their mortgage payment, the increase will come in 2007.
“When they figure the escrow for the house, if they will figure it against the sales price, they are not going to get a surprise down the road. But if they have called up here and said, ‘What was the taxes on this piece of property last year?” then there’s going to be a surprise come paying through your house payments.”
Max Watt, associate broker with Re/Max First Place Realtors, said she received the letter about the new tax assessments, which she expects will change how she sells homes.
“This is the first time in 28 years as a Realtor that I am going to have to deal with possible increases in escrow after closing,” she said. “I don’t know how to react to it.”