Why The Tax Assessor Doesn’t Determine Duplex Value

property tax with currencyI’ve said it before and I’ll say it again. The market value of your Minneapolis duplex on your property tax statement is not actually what your duplex is worth.

It’s what it was worth two years ago.

This is a conversation I have with duplex sellers all the time. So it’s worth having again.

All states differ in the way they calculate property taxes, so it’s important to call the local tax assessor and ask as to their methodology.

In Minnesota, however, tax assessors run a computer program that calculates the value of each property in their county. They do this based on closed real estate transactions that year.

Their program kicks out all of the foreclosures and short sales that sold to come up with a value. The reason for this is so many of the foreclosed properties have so much deferred maintenance they are not truly comparable to a duplex that’s occupied.

For example, is a duplex where all the pipes froze and burst the equivalent of a duplex with great water pressure because all the pipes are in tact?

Probably not.

Once the assessor has come up with a value, the county mails you a statement of what they think your taxable market value should be, and how much property tax they intend to levy because of it.

If you disagree, you can state your case. However, you only have until April 30 to debate it with them. If you don’t, the county will assess that tax, based on that value, the following year.

In other words, taxable market value in 2010 was based on sales that closed in 2008 and had proposed tax statements sent out in 2009. Likewise, our taxable market value in 2011 is calculated on numbers of properties that sold in 2009.

Are property values on the open market today what they were in 2009?

While we were already well into declining values, the trend hasn’t stopped.

The good news is when the Minneapolis real estate market starts recovery and values go up, property taxes will trail in value by two years.

The bad news is, right now, you’re probably paying on a duplex value that’s no longer true.