New home construction and property taxes
A new homes assessed value is based on its market value as of the date of completion. The assessor may look at the cost approach, sales comparison approach or with income producing properties the income approach to determine assessed value. Typically the assessor uses the sales comparison approach – meaning they look at other recently sold properties to come up with a value for your finished home. If you buy the finished home on the open market the assessor typically uses your purchase price.
How does the assessor find out about your remodel or new home? They receive notifications from the building department when permits are issued and finaled.
If you are under construction during the lien date (January 1) the assessor will value the partially completed home as of the lien date.
What if you are an owner builder? Will the assessor use your costs of construction to determine the assessed value? With the cost approach to appraising your property they will use “full economic costs” to determine value. You can interpret that as the retail value of the homes construction including builder profit and developer profit – not a discounted cost you may benefit from as an owner builder. I could go into detail about this – but the end result will likely be the cost approach will be very close the current market value of home based on comparison to other recently sold homes.
If you build a new home on a property you have owned for some time – you will keep the existing assessed value for the land – but the improvements will be assessed based on the new home.
You have a right to request an informal review if you do not agree with the assessment. If you do not agree with the review you can go thru a formal assessment appeal. You must do this during the time specified in the notice of assessment.
If you are a builder who is building to sell the finished home - you can likely get a builders exemption to avoid supplemental assessments until the home is completed. There are deadlines that you must meet to be granted this special exemption.
Once the new home is completed – whether you are a builder or the homeowner – the assessed value will be based on current market value as of completion.
That is a quick summary of the property tax rules relating to new home construction.