If you own property in Lancaster County, you probably have heard a lot about the County-wide property reassessment. You should have received your Preliminary Assessment Notice in the mail. If you suffered from a bit of shell shock after opening the Notice, take a breath, there are things you can do if you feel the value attributed to your home is incorrect.
What does it all mean?
During a reassessment, the market values of all property in the County are reviewed and adjusted. The adjustments are based on changes in the real estate market in order to assure that taxpayers are paying their fair share according to the home they live in. Two houses that were originally valued and assessed at the same amount may change drastically in value over the years. The home located in an area with a lot of growth would sell for more. The home with recent additions or improvements would likewise bring more than the home that has not aged well. Yet, if these two homes weren’t reassessed, both homeowners would still be paying the same amount in taxes, meaning one homeowner would be paying too little in taxes, and the other too much. The County-wide reassessment is designed to correct this problem.
How does it work?
In general, the new assessment of a property is the current fair market value of the property (FMV). According to the Courts, FMV is “the most probable price which a property will sell for in a competitive and open market.” To set the FMV of your property, the Assessment Office will consider things such as a recent purchase price of your property, or the recent sale prices of other similar properties. Even though the Assessment Office will consider those things, they might not always base your reassessment on only those items.
Your property tax – both local and county taxes and school taxes — is determined by multiplying the millage rate times your assessed value. The millage rate is the amount per $1,000 used to calculate taxes on property. The millage is set at different levels by each municipality and school district.
What is a Common Level Ratio?
Common Level Ratio (CLR) is the a comparison between the assessed value of all the property in the County, and the current market value of all the property in the County. It is determined by looking at all the sales prices of property in the County compared to what their assessed values are. For example, say you own a property that was assessed at $100,000 in 2004. To determine the real value of the property today, we would multiply the assessed value times the common level ratio (1.32 in Lancaster County right now). So today, that $100,000 property has an actual value of $132,000.
The CLR is not used to determine your taxes. It is used to set your assessment value. Look at the same example. Say you bought your property for $100,000. If that is today’s fair market value, then its assessment should be $100,000 ÷ 1.32 = $75,757. If the property is assessed at a value OVER $75,757, then the assessment is too high.
How is it different this year?
The Lancaster Law Blog has featured several posts regarding tax assessments including a post to help you make sense of the common level ratio, millage rates and your assessment. This year the CLR will be set at 1.0. This makes sense, because the County-wide reassessment is supposed to give the actual fair market value today. If the FMV equals the assessed value, then there is no need to adjust the value with the CLR. This is what the Lancaster County’s Taxpayers Guide to the 2018 Reassessment means when it says that “Market values in a reassessment year must be 100% or the true market value.”
So what should I do next?
The quick answer is, it depends. If your preliminary reassessment has increased, this does not necessarily mean that your taxes will significantly increase. Pennsylvania state law states that the municipal revenues from property taxes cannot increase by more than 10% (and even that requires a two-step process by the municipality). School taxes can only increase by 2-3% from the previous year. This means that if the total assessed value of the properties in a township go up, then the millage rates may need to be reduced in order to offset the increased value.
Of course, even though the total amount of taxes collected needs to remain relatively the same, this does not apply on a property-to-property basis. Because of the County-wide reassessment, some homeowners will undoubtedly find themselves paying more than they did last year, while others may see a decrease. Unfortunately, you won’t have a definitive answer to its effect on your taxes until the final assessed values are received in June.
In the meantime, homeowners can review their property records information online at the Lancaster County Property Tax Inquiry page to verify that the County’s records of your home are accurate. You can also research some comparable sales in your area to help you determine an approximate price that your home may bring if you were to sell. If your home is smaller, older, or has fewer amenities than neighboring properties, if it was on the market for a long time, if there has been a significant change to the neighborhood, or many other reasons, the assessed value might be too high. In these cases, you may want to consider an appeal. As a general rule of thumb, if you would have a hard time selling your home for the assessed amount, the appeal process may be the best step for you.
If you chose to appeal your final assessment, be prepared to provide some sort of proof to the Board of Assessment Appeals that your property is over-valued. Remember that you have only 40 days following the date of the final notice to appeal the new assessment.
If you would like assistance through the process, our firm would be happy to help you. We will continue to provide additional information on the Lancaster Law Blog to help Lancaster County homeowners understand the impact of the reassessment.