Knoxville (WVLT) – The nationwide mortgage meltdown is prompting thousands of people to sell their houses for less than what the tax man says they're worth.
That in turn has some of their neighbors demanding lower assessments and lower property taxes.
If you are wondering if the burst bubble has hit East Tennessee hard, the experts say they just don’t know yet.
“This is not the time to sell a house,” said Joan Purkey, a Buckhead resident of 30 years.
What the signs suggest are what the stats are showing.
500 fewer 3-bed, 2 bath homes sold in our region in 2007 compared to 2006 and the ones that did spent almost two more weeks on the market.
But the number that concerns sellers is the fact that the average price dropped by more than $20,000.
“I've got a couple of friends in real estate and they say it's tougher, so I'd have to go on that,” said Betsy Brown, a lakefront home owner.
But there might be a benefit, if your neighbor sells for less than asked, can you use that
to demand a lower assessment to lower your property taxes?
“We haven't seen that yet, but that doesn't mean it won't happen,” said John Whitehead, the Knox County property assessor.
By Tennessee law, Whitehead said properties are valued as of the first of the year.
“We're going to be using 2007 and 2006 sales for the most part, which will not reflect a whole lot of this slowdown in the market right now,” he said.
Last spring into early summer, the average price climbed from the year before, even though fewer houses sold and they took longer to sell.
That trend held from mid-summer into early Fall.
But the real question will come in 2009, when all property is re-appraised.
Will there be a sticker shock from this year, compared to the boom years of 2005 and 2006?
Could that spark a boom in re-assessments?
“A lot of our analysis is already done and that could void some of the analysis,” said Whitehead who joked that all the “what if’s” make him glad he can’t run for re-election.
“We never really dropped that much in value,” said Lee Mrazek, president of the Knoxville Area Association of Realtors. “We had somewhat of a drop, but there still was growth in that area.”
Mrazek went on to say that East Tennessee's steady growth record should keep values steady at worst, but they are more likely to grow.
Brown thinks she will ride it out.
“I'm not moving and we felt like ours was fair for tax purposes the last time we got one,” she said.
The price versus value question will heat up closer to October when property taxes come due.
As you might have guessed, governments don't like surprises, but if property values drop enough to prompt a push to re-assess taxes and your revenue drops, they will either have to cut services or push to raise the tax rate.
A move that would force homeowners to pay more on a house worth less.