The most prevalent of all tax related questions is sale price and what impact it will have on one’s future real estate taxes. We were able to pose this and many other important questions to James Tighe, Teaneck’s tax assessor, and his answers will be featured here over the coming weeks.
Nechama Polak: A house is assessed at one number and then is sold at a price which is a few hundred thousand dollars more. Will the taxes go up?
Phrased differently: Does the sale price of a home impact the assessed value of the particular home?
James Tighe: The answer is not necessarily. Although New Jersey’s property tax assessments are based on “market value,” New Jersey specifically prohibits the practice of so-called “spot assessing.” Market value is generally defined as the price a property would obtain in an arm’s-length transaction after being exposed to the market for a sufficient length of time, with no undue pressure on either party to the transaction. (Undue pressure refers to truly extraordinary circumstances like bankruptcy, court ordered sales, estate sales, etc.) Spot assessing refers to the practice of singling out only those properties that have recently sold for review and assessment revision. New Jersey courts have determined that individually assessing specific properties, without reviewing the entire class of similar properties, is discriminatory and inequitable. Obvious exceptions include instances where physical changes affecting property value (i.e. renovations, additions or damages) took place, or properties where legal changes might have affected value (i.e. zoning changes, approvals for use, etc.).
In the year in which a periodic revaluation is being conducted, the sale price will be used as one of the benchmarks to set the assessed value of the subject property as well as other homes in the neighborhood. This may or may not result in a tax increase since all properties are being revised simultaneously. If all properties are changing in value at the same rate and are reassessed accordingly, there may be no change in taxes. Significant tax increases after a revaluation occur when certain neighborhoods, or property classes, have experienced value changes that exceed the rest of the township. They may also occur if the property contains improvements that were not previously assessed. Conversely, taxes may decrease after a revaluation for property classes or neighborhoods that lag behind the rest of the township in terms of value.
Nechama Polak is the broker of record and owner of V and N Group LLC, located at 1401 Palisade Ave, Teaneck. Contact her at [email protected] or 201 826 8809.
