‘Perfect storm’ increases property values
News | Published on April 18, 2022 at 1:00pm CDT
Questions about your home’s value? Call the assessor’s office first
By Tim Douglass
tdouglass@pctribune.com
It is an unusual year for homeowners in Pope County.
Local property values have increased significantly this year, largely due to what Pope County Assessor Michael Wacker calls the “perfect storm.”
Coming out of a pandemic that perfect storm features a combination of low interest rates, high demand for homes, a low supply of homes, selling homes elsewhere and bringing those profits here to purchase a home, and significant increases in material costs, making home construction less affordable.
“And then there’s this thing called remote work, which means a person can work from home and can live and work anywhere,” Wacker said.
“All those things together caused property values to increase to the degree that I haven’t seen in my just shy of 20 years as an assessor,” Wacker said. Homes are selling quickly and, in many cases, at much higher prices.
Pope County isn’t the only place seeing significant increases in property values. “It’s happening in many counties all over Minnesota and the country. We’re definitely not on an island,” he said.
“The eye of the storm is that residential property has been selling at much higher prices, triggering increased market values across the spectrum. The days of offers and counter offers on houses are over,” Wacker said. “I’m told, most buyers need to be pre-approved for amounts well above the house they are interested in and can make offers on the spot, or cash offers, often for more than the asking price.”
Although home values are increasing, drastically in some cases, so is other property. Wacker said he saw increases on all property values, including business property and agricultural property. Ag land didn’t increase as much in Pope County, rising about 15%, “but you also have to realize that in years past it has decreased,” Wacker said. He pointed out that ag land actually decreased about 5% the previous year.
Still, values increased the most for residential and seasonal properties and not just around lakes or in cities, but in townships as well. “We’ve seen homes selling at higher prices no matter where they’re located,” Wacker said.
Why did property values increase so much in one year?
Wacker said last week that one of the main questions he gets from property owners is why the value increased so much in one year. Property values are based on the typical sales prices which fluctuate with general market conditions such as the general economy, property locations, supply and demand, demographic changes and changes in tax laws. According to Minnesota state laws, as property values change in the market place, those changes must be reflected in the assessor’s Estimated Market Values (EMV).
According to state statute, the market value estimated by the assessor should be at, or very close to, the amount the property would sell for if placed on the open market. The State Statute requires the overall level of assessment to be between 90% and 105% of market value. Market value is the most probable price that would prevail under competitive, open-market conditions.
The state did provide periods of “limited value market,” which limited the amount a property could be increased in value in one year. It tried that in the 1970s and again in the 1990s, according to Wacker. But that program expired in the early 2000s because it ended up sheltering property in areas that were going up very fast. While limiting property values did provide a temporary buffer, it was determined that it caused a lot of inequity in the tax system, Wacker explained. So now, state law requires that median ratio must be within that 90% to 105% of what the property would be sold for on an open market. “When the median falls outside of this, we have to increase or decrease our values. If I don’t the State comes in and orders the change,” Wacker explained.
Some relief available
But there may be some tax relief for eligible property owners.
Wacker said if a Homestead property increased more than 12% and $100 just on taxes, excluding improvements, a property tax refund could be in play. In addition, and a second option to qualify, a homestead property owner with lower income might also be eligible for property tax refunds without needing to meet the above requirements. These refunds can total upwards of several thousand dollars. He suggested that this year might be a good year to talk to a tax preparer about a M1PR refund, even if that property owner has not been eligible in the past. He also stated that the legislature could be providing some relief during this legislative session.
Call the Assessor’s office now if you believe your estimated market value is incorrect
The first thing to do is to call the Pope County Assessor’s office at 320-634-7715. Residents can also email the assessor at pub.assessor@co.pope.mn.us. Wacker emphasized that even those residents who plan to attend a local board of equalization meeting in their city or township should call the assessor’s office first and “arrange for us to go through the property so that we have accurate information.”
“If people just show up, according to the law, the boards aren’t allowed to make any changes if we haven’t been allowed to view the interior of the property. We don’t want people to show up expecting changes, and then go away disappointed,” he said.
Those who live in jurisdictions within the county that don’t have local board of equalization meetings can contact the Pope County Assessor to attend what is called an “open book meeting” at the assessor’s office. Anyone who wants more information on the estimated market value of property should always contact the assessor first, Wacker said. “Please call us prior to the public board meetings; many times we can fix or explain issues without needing to attend the meeting,” he added.
He added that the county assessor’s web page now has a short video on property values that Wacker says is good information and only takes a few minutes to view. In addition, the website at www.co.pope.mn.us/departments/Assessor also has a page with Frequently Asked Questions (FAQ) that can provide good information for the property owner.
Does increased property value mean taxes will go up?
Not necessarily, said Wacker. If all property values equally increased 20% and government agencies don’t increase their budgets, it would lower a jurisdiction’s tax rate and would actually cover the same budget without any tax increase. Still, increased market values that are more than others in the area can mean taxes go up, but it’s should not be as dramatic as the increase in property value, Wacker explained.
There are a number of items that affect property taxes. The following are those that traditionally have had the largest impacts:
•Changes to the tax levy (amount of money requested by taxing jurisdictions for operations) made by the city, county, school district or special taxing districts.
•Changes to the market value estimate of your property.
•Changes in the market values for the area or a particular type of property.
•Legislative changes to the property classification rates, state aid formulas and other tax laws.
•Legislative unfunded mandates (usually seen as an increase in the local government tax levy).
•New taxes approved by referendum.
While the spring of the year is the time to get more information on property values, it is in late fall when government entities set their budgets and levies. At that time, residents can question items in the government entity’s budget, but cannot question a property’s market value, which is always set in the spring. Now is the time to contact the Pope County Assessor about the market value of a property.