There is a lot of talk among investors and homeowners right now about where their property values stand after receiving the latest “market” revaluation from Mecklenburg County. After receiving my own revaluation and speaking with several other property owners in this market, it’s clear that some view the situation positively, but others negatively.
Assessing these opposing opinions, I’ve come to believe that each positive and each negative opinion has value, although interpretations for each may vary.
Some believe the new revaluation de-emphasizes the “value” of their property, although, on the positive side, their taxes may go down. Conversely, others feel more negatively, that by paying less in taxes, the overall effect would be a collective downward spiral in the value of their home.
On the other hand, for those who had increases in tax value, some also view it as a positive: that while market values in their neighborhood have increased, they know they may be making up for it in increased tax payments.
Yet there is yet another perspective. Let’s first describe how the appraisal standards are defined through the North Carolina General Statute 105-283.
The statute states, “All property, real and personal, shall as far as practicable be appraised or valued at its true value in money. … The words ‘true value’ shall be interpreted as meaning market value, that is, the price estimated in terms of money at which the property would change hands between a willing buyer and a willing seller.”
From this definition we can interpret it as an attempt to give a true valuation of the property based on how much money would be estimated in exchange between two parties for a particular property. However, by doing it this way — by not individually assessing the interior, exterior and many other factors of a property — it then becomes very difficult to give an accurate representation of a property’s true worth, or, rather, what someone is willing to pay for that property.
From an investor’s perspective, higher tax values don’t necessarily mean an increase in market value or that values are trending in that direction. In fact, to a buyer, it means higher carrying costs and creating less cash flow, thereby making it even less desirable to purchase.
For example, you may be willing to buy a $200,000 house but may choose to look instead to that neighborhood with a similarly priced house that doesn’t have an inflated tax value.
This interpretation is also not a clear indication that true market values have or will go up in that area. Sure, tax values have gone up, but does that make that neighborhood any more desirable to buy into?
Will it attract more buyers and cause demand to go up in that area, driving prices up as a result? Not likely. In fact, it is one of the primary reasons many residents relocated to lower-taxed areas, such as Waxhaw, Fort Mill and other areas just outside of Mecklenburg County.
What is really interesting, though, is that true market values, as a whole, have decreased since their peak values back in 2006. For instance, in some neighborhoods where tax values have increased dramatically, it seems to reflect 2006 market values, which is likely not a timely representation of today’s true market values.
Let’s face it: Property taxes make up the majority of all tax dollars collected within Charlotte-Mecklenburg.
Additionally, property taxes make up 62 percent of the money collected for the Mecklenburg County budget. Sure, we need taxes to pay for our schools, public services and community programs, but we also need to keep our tax rates lower when compared with other cities. Our present lower tax rates are still one of the primary factors that make Charlotte and surrounding areas so attractive for relocation.
This point is easily exemplified by the huge influx of out-of-state companies and individuals who relocated here from the Northeast and other geographical areas over the past 20 years where the cost to own a home was staggeringly high because of property taxation.
To sum it all up, the real question is: What will happen with the actual tax rate used to determine property taxes for each individual home?
Currently, the rate stands at 1.2973 per $100 of tax value for a property. However, the really hard part is that we will just have to sit tight and see whether the rate is going to change or stay the same.
Rory Cummins is a Charlotte landlord and real estate investor and the operator of charlotterealestateloop.com.