We are very thankful to Teaneck’s tax assessor James Tighe for taking the time to answer these important questions related to real estate taxes. Understanding one’s tax burden is something that affects all aspects of home ownership as well as understanding what one’s purchasing power is.
Nechama Polak: Are there any plans for a future reassessment of the township of Teaneck? (you once told me not in your lifetime!)
James: There are currently no pending orders for the revaluation of Teaneck. However, our ratio of assessed value to true value has fallen to 81.46% for 2021. Given the current runup in prices, it will likely decline again for 2022. The Bergen County Board of Taxation’s lower limit for ratios is 85%. When the threat of COVID clears, it is likely that the County Board of Taxation will consider ordering a revaluation. (I may have to accelerate my retirement plans!)
Nechama Polak: If a house sells for less than its assessed value will the assessed value of the home be lowered automatically?
James: As discussed above, “Spot Assessing” is prohibited in New Jersey. This would also be true for properties which sold for less than their assessed value. (Theoretically, if it’s true for one property, it may be true for many similar properties. Adjustments cannot simply be made without reviewing all similar properties throughout the township.) Although not automatically adjusted, assessments of such properties can be reviewed at the request of the property owner to determine if the physical description of the property is accurate. Owners also have the right to file an appeal on the basis of the sale price and the matter can be reviewed as part of the appeal process.
Nechama Polak: Can you explain what the following means—houses are valued at 81% of their market value?
James: The Director’s Ratio is calculated on an annual basis by the director of the Division of Taxation. It is based on a multi-year analysis of every usable sale in the district versus the assessed value for each of those sales. Simply put, the assessed value of each sold property is divided by its sale price to determine what the assessment ratio is for that particular property. All these individual ratios are weighted by class then averaged and blended with the prior sampling period’s sales to smooth out abrupt year to year changes. The result of these calculations is an average ratio of assessed value to true value for the municipality. A ratio of 81% simply means that, on average, properties are assessed at 81% of their actual value. A property with an assessed value of $500,000 has an implied market value of $617,300 at a ratio of 81% ($500,000 is 81% of $617,300). Conversely, properties with a market value of $617,300 should be assessed at or around $500,000 ($617,300 x.81).
Municipal-wide revaluations are typically not conducted on an annual basis. As property values change over time and assessments stay the same, the ratio between them changes. In Teaneck, properties that were assessed at market value six years ago are now worth considerably more. Teaneck’s ratio of assessed value to true value has therefore declined to 81%. (For example, a property that sold for $100,000 that had an assessed value of $100,000 in 2015 indicates an assessment to value ratio of 100%. If that property sells for $150,000 five years after the revaluation and still has an assessed value of only $100,000, the ratio of that sale is 66.67%.) As can be seen, this is an inverse relationship. Declining ratios over time indicate that real estate values are increasing in the community. Rising ratios indicate that property values are declining.
Nechama Polak is the broker of record and owner of V and N Group LLC located at 1401 Palisade Ave. [email protected] 201 826 8809.