Expert: Dick Dennis - 10/12/2008

Question
QUESTION: Dennis,

I own a condo in Southern California that is now valued significantly below the base assessed property tax value (bought about 10 months before "subprime" became the new buzzword).  As such I have been able to get my tax temporarily reduced through the standard informal appeal process.  I am also getting married in the springtime and am trying to find out if that opens any options to me that would result in a reassessment and a new base tax value at current market conditions.  The mortgage balance exceeds the property value at this time making a traditional sale difficult.  We both have good credit and are not in any financial distress.

Patrick

ANSWER: Because you bought your condo what appears to be somewhere around 2005 (the absolute apex of the boom market) or 2006 you were looked on favorably by your county tax assessor, Patrick. However, be aware that they will be assessing your property to make up for the taxes you did not pay. I know, I did the same thing. Proposition 13 does not address what happens if property values go down WITHOUT buying the property at a lower price. It just says that the assessment goes up about 2% per year. But the tax assessors have been benevolent.

As for your mortgage exceeding the value of the propery, the only way you can escape that predicament is to sell the property on a short sale. But the lender may not cooperate with you on that idea because you are not behind in your payments. Your credit is good and I am sure you do not want to ruin it by trying to do a short sale.

Be prepared to stay in your home for the next five years, at least. Hopefully, by that time the value of your condo will equal or better your mortgage. In the meantime, I recommend you take advantage of all these terrrrrrrriffic bargains offered by foreclosures and build up an estate that by the time five years pass by you'll be way ahead of the game. I do wish you well.

Dick Dennis       dick@DickDennis.com

---------- FOLLOW-UP ----------

QUESTION: Thanks for the response Dick.  I think maybe you misunderstood the main point of my question.  I'm trying to find out if there is any way by adding my fiance to the title or doing some sort of transfer that could trigger a new base value tax assessment so that when values go back up I'll get the benefits of Prop 13 immediately rather than watching my tax bill climb back up at whatever the rate the market rebounds until it reaches the sale value?  I'm in Orange County if that is relevant.  Is this a question for the county assessor, a tax attorney, realtor, etc?

Answer
You can put your fiance on title with you at any time, Patrick, just by executing a grant deed from you to you and her as to joint tenancy or community property (ask your favorite real estate attorney or tax expert which is best for you). You can also execute a quit-claim deed to her as well, as to 50% interest in the property (or whatever percentage you deem).

However, be aware that as long as you remain on title in the process of adding her name (however you do it) your tax base as far as the county assessor is concerned is not going to change one iota.

The only way the tax base can be lowered is if you actually sell (and please believe me that tax assessor as seeh all the tricks people have tried) to a totally different party or parties. When you do the transfer (whichever way you do it) you will have to fill out a form in which you disclose what kind of transaction you are executing. This is what tells the assessor at what rate the property should be assessed.

I suppose you could try and "sell" the property totally to your fiance, since she has a different name at this time, than you at a sales price that would give you a tax rate with which you would be satisfied. Then a few months later or a year or two she can execute a quit-claim deed putting YOU on title with HER. But that could be risky should your relationship not endure. If you, say, immediately get back onto title after "selling" the property to her you may catch the eye of the assessor (remember I said they've seen all the tricks).

Then you have to contend with how the IRS sees this manuever. I won't get into that now because it appears that I am writing a book here. Just go see that tax expert I suggested. I wish you well.

Dick Dennis     dick@dickdennis.com
I'm over the hill in southwest Riverside County.