Real Estate Appraisals and Property Taxes, by Carl Heldmann
Summary: A real estate appraisal determines the true market value, but property taxes in most locales are based on the tax assessor’s determination of Market Value using much of the same criteria a real estate appraiser uses for a real estate appraisal.
I have your 5th edition Be Your Own House Contractor book and it has provided me a great sense of understanding, insight and instilled confidence in my decision to be my own contractor.
I am building a one-story with a large bonus above the garage and I don't want to incur any more property tax (Oregon) than I have to.
I want to leave the bonus space, which is 1012 sq/ft as unfinished space so that I don't get charged property taxes for the additional square footage.
What I am asking is, how finished can I make my bonus room and still not have it count in my final square feet to be taxed upon?
Any insight would be greatly appreciated…and yes, I did search for a related Blog post.
Thank you for all that you provide for a frugal community.
Thanks for the compliments.
You are wise to be concerned about property taxes.
Many people don’t think about how much property taxes will add to their monthly payment when they are preparing their initial home building budget.
They would if they use the mortgage payment affordability calculator found on my Getting Started web page.
A real estate appraisal determines the true market value, but property taxes in most locales are based on the tax assessor’s determination of Market Value using much of the same criteria a real estate appraiser uses for a real estate appraisal.
Market Value, or Real Market Value, or a real estate appraisal is not based solely on square footage. It is based on different criteria in different locales and is often quite nebulous.
Here are some of the important criteria used to determine Market Value:
• Square footage of finished living area (habitable space).
• Square footage of basements.
• Square footage of garages, or the number of car spaces.
• School district
• Comparable sales in the same school district and/or zip code
• Condition of the structure (s).
• Other factors
You might want to read “Property Tax Information” for Multnomah County Oregon.
If I were you, I would call the tax assessor in my county and discuss exactly what you are asking me.
I would also call a real estate appraiser and/or a Realtor that is familiar with the school district I am building in and discuss the issue.
What makes a room “finished”?
Finished is usually defined by real estate appraisers as, “finished in the same manner as the rest of the home”.
To me, finishing a bonus room over the garage doesn’t add as much market value me as the roof pitch it took to make the space available in the first place.
Market Value is subjective no matter what anyone says.
No one will be able to give you a definitive answer because there isn’t one.
So, “How finished can unfinished be?”
having said all the above, and keeping in mind that the tax assessor will have access to your blueprints and will review them:
If the space above the garage has any of the following designated on the blueprints or is evident after construction is finished and a physical inspection is made, suspicion on the part of the tax assessor could prompt a higher assessment.
1. A framed doorway.
2. An entry door.
3. A stairway leading to the area.
4. Electrical wiring other than minimum wiring found normal in a storage area.
6. Drywall or paneling.
7. The floor ready for a finished floor.
8. Framed knee walls and ceiling.
In other words, in my opinion, not only can it not be finished at all, it can't even be a designated area to be finished at a later date in time.
I could be wrong. Check it out!