Foreclosure bill could cut homes’ taxable value

Every month in metro Atlanta, lenders foreclose on thousands of home mortgages and unload hundreds of former foreclosed homes at fire sale prices.

Those numbers, traditionally, have been ignored by local assessors as they set yearly tax values. Instead, they’ve relied on sales at retail prices or “fair market” value.

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During a housing market downturn, that practice can leave wide gaps between sales values and tax values — meaning some homeowners would be overtaxed.

State legislators want to change that with Senate Bill 55, which directs assessors to count foreclosure sales when setting tax values. The bill sailed through the Senate Finance Committee with no opposition Thursday.

“One foreclosure in a subdivision can affect the entire subdivision,” said state Sen. Chip Pearson (R-Dawsonville), the bill’s sponsor. “They need to be considered as a comparable sale. It’s not optional. It is the market.”

The bill could have far-reaching impact — not only for property owners, but also for local governments. Some owners of property in areas with foreclosures could see their tax values drastically cut and their tax bills fall.

Assessors and local officials fear including discounted sales will drive down assessed values and cost local governments millions in tax revenues. Assessors also struggle with the idea because it’s such a drastic change in a system that’s designed to record gradual increases in values, not sharp decreases.

Fulton’s chief appraiser, Burt Manning, said he’s never seen a market so volatile.

“You are telling me something in this legislation that is contrary to fair market value,” Manning said. “I can’t balance that with what I know. Right now, the appraisal procedures manual tell us to ignore distressed sales.”

Terry Rader, interim chief appraiser for DeKalb County, said large counties like DeKalb and Fulton would lose billions in tax values if they count foreclosures when setting values for 2009.

“It would be a huge amount,” Rader said. “We’ve got 200,000-plus parcels and 8,000-plus foreclosures. I’m afraid to look at what that would mean for us.”

A search of homes for sale in any of the four major metro counties shows some foreclosures and bank-owned properties are listed for sale currently at half or less of their list value. Last year, a local nonprofit, the Atlanta Neighborhood Development Partnership, commissioned a study that found property owners in foreclosure-heavy ZIP codes overpaid taxes by more than $71.5 million because assessments were higher than market value.