Real Estate Tax

The assessors look at a property the same way a potential buyer looks at a property. The assessors consider the factors that a potential buyer considers. Examples of important factors are the following: location, interior condition, house size, kitchen quality, and bath quality. The assessors examine many qualities and conditions and then look for comparable properties that have sold in the neighborhood. Since no two houses are identical, adjustments are made for differing characteristics to determine the assessment. Thus the assessment is an estimate of market value.

Market value changes occur in many forms. Buyers have different requirements and these requirements sometimes change from year to year. Also, sometimes renovations have been performed on a property that would cause a change in assessed value different from a similar property that did not undergo renovations. A recent inspection by the assessor’s office also may have contributed to a change in assessed value. Perhaps the property had not been inspected in several years and the property information has now been updated to more accurately reflect the condition of the property.

The assessment is an estimate of market value. The definition of market value is the price a willing buyer would pay a willing seller in an open, competitive market, without any undue influences. The assessment represents the estimate of market value as of January 1, 2020 for Fiscal Year 2021. This estimate of market value is determined by examining sales of properties from calendar year 2019. Although the majority of properties are not for sale, Massachusetts General Laws requires an assessment, or an estimate of market value, on every property. Sales of similar or comparable properties within a neighborhood are the best indicator of market value.

Proposition 2 ½ limits the City of Leominster, and all other Massachusetts communities, the amount of citywide taxes that can be raised. Proposition 2 ½ limits a community to raising citywide taxes by 2.5% from the previous year’s levy limit. Allowing for new growth can then increase this levy limit. New growth consists of property tax increases caused by new construction, renovations or land use changes. Proposition 2 ½ does not limit any individual property tax increase or decrease. For example, in Fiscal Year 2020, the Mayor and the City Council approved a budget that included a tax levy of $75,076,958. The levy limit for Fiscal Year 2020 was $80,298,856. So, the maximum amount of taxes that can be budgeted by the Mayor and City Council for Fiscal Year 2021 is $80,298,856 X 102.5% = $82,306,327 plus certified new growth. (The 102.5% number is increasing the previous year’s limit by 2.5%). The new growth, which was certified by the Massachusetts Department of Revenue, is $1,139,963. Therefore, the maximum amount of taxes which can be levied for Fiscal Year 2021 is $80,298,856 + $2,007,471 + $1,139,963 = $83,446,290. This figure is the levy limit, which will be used to determine next year’s maximum tax levy. A community may increase the property tax levy less than 2.5%, but that is a determination made by the budgetary requirements of the city as determined by the Mayor and the City Council. A community may not increase the tax levy greater than 2.5% without approval of the voters. 

Proposition 2 ½ limits the amount of taxes a community can raise from property tax. The assessment is an estimate of market value. Since the real estate market changes are based upon the buyers’ and sellers’ needs, there is no limit to the amount an assessment can increase or decrease. Assessment changes are always based on the real estate market. For example, if a property sells for $500,000 in calendar year 2019, there is no limit or minimum price it would sell for in calendar year 2020 or beyond. It could sell for $600,000, $700,000, $1,000,000 or $400,000. The sale price would be based on the real estate market at that time. The assessments do not predict market value. The assessments reflect (or report) market value.

The assessment is an estimate of market value. The selling price of a property is not related to the age of the owner. The assessment cannot be lowered or raised based on the age of the owner. The assessments are a reflection of the real estate market. Elderly owners do not sell their properties for any lower or higher prices than the market will allow. If property owners throughout the city sell their homes for less, the assessments will decrease. If property owners sell their homes for more, the assessments will increase.

The assessment is an estimate of market value. The selling price of a property is not related to the age of the owner. The assessment cannot be lowered or raised based on the age of the owner. The assessments are a reflection of the real estate market. Young owners do not sell their properties for any lower or higher prices than the market will allow. If property owners throughout the city sell their homes for less, the assessments will decrease. If property owners sell their homes for more, the assessments will increase.

You do not have to allow the assessors into your home. We only request the inspection in order to be as fair and accurate as possible. However, if an assessor is denied entrance, property owners give up their ability to challenge the assessed value. It is impossible to question an assessment if a property owner refuses to allow the assessors a view of the entire property. In instances where the assessors do not get into a property, estimates are made about the condition of the interior of the property, the kitchen and bath qualities, and whether there is finished attic space and finished basement space.

As stated in Question 7, you do not have to allow the assessors into your home. We only request the inspection so we can be as fair and accurate as possible. Accurate assessments are based on accurate information. By allowing the assessors to view the interior and exterior of your property, your assessed value is based on accurate information. If a person does not allow the assessors to view the interior and exterior of a property, estimates are made about the condition of the interior of the property, the kitchen and bath qualities, and whether there is finished attic space and finished basement space. If the estimates are overstated, property owners may contact the assessor’s office to arrange an interior and exterior inspection of their property.

Just as a potential buyer wants to see the interior and exterior of the property before determining a purchase price, the assessors want to see the interior and exterior of the property to make an accurate determination about the market value of the property. The interior information of a property is essential in determining the estimate of market value. Without the actual information, estimates of the interior information have to be made.

The assessed value represents the estimate of market value of the property. The real estate market changes constantly. The assessment for Fiscal Year 2021 represents the estimate of market value as of January 1, 2020. This estimate of market value is determined by examining sales of properties from calendar year 2019. Although there may not have been any physical changes to the property, buyers may be paying more or less for properties than they were in previous years. The assessment changes reflect the changes in the purchase prices of similar homes in the neighborhood. The assessments do not predict market value. The assessments reflect (or report) market value. The real estate market can change dramatically from year to year. It is not limited to 1, 5, 10 or 25-year intervals. The buyers and sellers determine the market value of properties. The assessments reflect what the buyers and sellers are doing as of the assessment date.

The assessed value represents the estimate of market value of the property. The real estate market changes constantly. The assessments change based upon these changes in the real estate market. The assessments do not automatically go up or down every year. The assessed values in 2010-2013 went down because the buyers were paying less for properties than they were in previous years. The assessed values then remained relatively constant from Fiscal Year 2013 to Fiscal Year 2014 because the purchase prices remained constant in this period. The assessments have increased recently because of the increase in the real estate market. The changes in the assessment reflect the real estate sales from the appropriate time period. For Fiscal Year 2021, it is the market value as of January 1, 2020. This Fiscal Year 2021 assessment is determined by examining sales of properties from calendar year 2019.

The assessors do not raise or lower taxes. The assessors reflect (or report) market value. The tax increase or decrease is determined by the budgetary requirements of the Mayor and the City Council to run the city. Rising or falling assessed values do not mean rising or falling tax bills. The increase or decrease in taxes seen by the property owner is a direct result of the increase or decrease in the budget. The budget increase or decrease determines the tax increase or decrease. Individual property owners may see an increase in their assessments due to renovations, additions or improvements that would cause an increase in their tax liability. There may also be some shifting of tax liability among classes of property (residential, commercial, industrial, personal) based upon the overall increase or decrease in value of the particular class. The primary reason for a tax increase or decrease is based on the budget requirements of the Mayor and the City Council to fund city operations.

No. The valuation change will not be indicative of the tax change. There are two components that help determine the tax rate. The first is the budgetary requirements of the Mayor and the City Council to run the city. The second is the overall value of the property within the city. For example, if the budget increases 5%, then the tax increase throughout the city would be approximately 5%, regardless of what happened to the overall assessed values. For example, if the budget increased 5% and all the assessments in the city went up 20%, the average tax increase would still be 5%. The tax rate, which is calculated simply by dividing the budget by the value of property, would decrease approximately 15%. In another example, if the budget increased 5% and all the assessments went down 20%, the average tax increase would still be 5%. The tax rate, which is calculated simply by dividing the budget by the value of property, would increase approximately 25%.

The first step in comparing properties is to examine the factual components of each property. Many times properties that appear larger are in fact much smaller than people think. Quality characteristics should also be examined when making comparisons. For example, a property with a newer kitchen would sell for more than a property with a much older, unimproved kitchen with all other factors being comparable. Ultimately, the assessors have to determine if the assessment represents market value on the subject property and also if the assessed value on the neighbors’ property represents market value. If a neighboring property is too low in relation to surrounding properties, the assessors cannot compound their low assessment by also lowering surrounding properties. The resolution may be that the assessors have to raise the neighboring property’s assessed value to make it more in line with the surrounding properties. The most important criterion the assessors examine in an abatement request is the market value of the property of the person filing the abatement and the market value of any property that the person filing the abatement mentions on the application. For example, if there were 5 identical houses on a street and 4 were assessed for $500,000 and one was assessed for $100,000, and there were three sales on the street at $500,000 each, then the assessors could not lower the 4 properties to $100,000. Based upon the sales, the market value would be very close to $500,000. The correct action for the assessors would be to raise the property assessed for $100,000 to $500,000.

No. If there was a specific problem or circumstance about your property which warranted an abatement in the past, that information would remain on the property record until the issue was corrected. All subsequent assessments would be calculated based on the information that originally warranted the abatement. Many times people will file an abatement every year telling us they are located next to, for example, a gas station. We know the gas station is there every year and will take it into consideration when calculating new assessed values. You need not file every year.

An abatement is a reduction in a real estate valuation based on a correction to the assessed valuation. The assessed value has nothing to do with the age of the owner, the income of the owner or any other financial information about the owner. The assessment represents an estimate of market value. An elderly exemption is a reduction in a real estate tax due based on certain age and income requirements set forth by the Commonwealth of Massachusetts. An individual who files for an abatement of real estate valuation because of age and/or income has filed the wrong form. Instead, that individual should file for an elderly exemption. The only factor the assessors examine on an abatement application is the market value of the property. Age and/or income do not factor into assessment determination. (Please refer to Questions 5 and 6)

Market value changes occur in many forms. Buyers have different requirements and these requirements sometimes change from year to year. Also, sometimes renovations have been performed on a property that would cause a change in assessed value different from a similar property that did not have renovations. A recent inspection by the assessor’s office also may have contributed to a change in assessed value. Perhaps the property had not been inspected in several years and the property information has now been updated to more accurately reflect the condition of the property. Historical trends are just historical information. Properties change over time, as do market values. Just because a property was assessed less than a neighboring property in 1973 does not mean the property will always be assessed less than the neighboring property. Renovations, additions, disrepair, fire and other factors can also change historical relationships.

Assessments reflect what has occurred in the real estate market. In Leominster, single-family properties in the past 5-10 years have sold for more than similarly sized two-family properties in the same neighborhood. Most buyers in Leominster do not want to be landlords. The typical buyer in Leominster prefers a single-family and the sales prices over the past 5-10 years bear out this fact. A single-family property cannot be compared to a two-family any more than it can be compared to a condominium. Comparisons should be made between similar uses of properties. The difference in selling prices between a single-family and a two-family property has closed significantly in the last 5 calendar years, with the sale price of two-family dwellings increasing at a much faster rate than the single-family property. Two-family properties have become more popular with new homebuyers because of the ability of a tenant to contribute to the owner’s mortgage obligation. The two-family property is also priced slightly less than a comparable single-family property.

No. If the property is three times larger than your property, it would not be considered comparable to yours. For example, if your property is a 1,500 square foot home, assessed for $100,000 and up the street a 4,500 square foot home sold for $250,000, it would not be considered comparable to your property and this sale would not impact your assessment. Assessments are based on comparable sales. Even if a 1,500 square foot home sold next door for $200,000, one sale would not impact your assessment. However, for example, if a few sales of 1,500 square foot homes sold for $200,000, then the market value of a 1,500 square foot home in that neighborhood would be close to $200,000. You should expect a change in future assessments because of the apparent change in market value. In this example where there were multiple sales of 1,500 square foot homes for $200,000, it appears the market value of the 1,500 square foot home is no longer $100,000.

Typically, larger properties sell for more than smaller properties with all other factors being equal. If an addition is put on a home, the house becomes larger and generally the market value of the property increases. The assessors would then have to see what similarly sized properties were selling for in the neighborhood. Historical sales have indicated that larger homes sell for more than smaller homes with all other factors being equal. Since the assessed value is an estimate of market value, it is highly likely that the assessed value of your property will increase once the addition is put on the property.

Legally, the assessors must retain the owner of record as of January 1, 2013 for Fiscal Year 2014. If you purchased the property after January 1, 2013, by law we will carry both your name and the legal owner as of January 1, 2013. For Fiscal Year 2015, the legal owner as of January 1, 2014 will be maintained. This is when the prior owner would be removed and your name would be the only name appearing on the ownership record.

Typically, the home is the single largest investment most people make. The assessment reflects the market value of this asset. People often associate rising assessments with rising taxes. However, this is not the case. Rising budgets cause rising taxes. If the budget increases, typically taxes increase. If the budget decreases, typically taxes decrease. The assessed value represents the market value of the property. If all the assessments went down 25% and the budget increased, taxes would still increase. The budget is the driving force behind rising taxes. If the assessed value of a property increases, this generally increases the property owner’s equity in the property. Although many property owners are not selling their homes, an increased asset value is usually received as welcome news. Most people understand tax increases are not caused by assessment increases. They understand that increased spending causes rising tax bills. The majority of property owners are glad to hear their home is increasing in value, even if they are not currently selling their property.

Assessments reflect the property condition and market value of the property on January 1 of the prior year. If, for example, your neighbors took out a building permit in December, and the construction work was not started until after January 1, the change in the market value of the property would not be reflected in the assessment until the following fiscal year. Sometimes, when there is a large construction project, it can take several years for the entire project’s market value to be reflected in the assessment. Each year the assessors would determine how much the market value of your neighbor’s home increased, based on how far along the construction was on January 1.

The Leominster City Council complied with a directive from the Commonwealth of Massachusetts to issue a supplemental tax bill to property owners whose property had construction resulting in an increase in market value (assessment) of more than 50%. This provision is triggered by the issuance of an occupancy permit and an increase in market value of more than 50%. The assessors analyze all properties with occupancy permits to determine if the construction added more than 50% to the fair market value of the property. If the construction added more than 50% to the fair market value of the property, then a supplemental tax bill is issued. The supplemental tax is based on the difference between the original market value and the new market value, multiplied by the tax rate and prorated from the date of the occupancy permit to the end of the fiscal year. In certain instances, a property owner could receive a supplemental tax bill for the prior fiscal year as well as the current fiscal year, depending on the date of the occupancy permit.