What effect do foreclosures have on assessments?
In calculating assessments for a particular tax year, the assessment office only takes into account bona fide property sales and not transfers that are distress related in any way (e.g. related to foreclosure). Foreclosure related sales generally include court ordered sales by public auction, short sales, and bank sales. Auction sales are rarely used for assessment purposes since the high bidder is usually the financial institution and the bid amount is the amount of the defaulted loan. Short sales and bank sales are considered, but only used if the key elements of a valid “market value” transaction are met. The effect of foreclosure related sales on the marketplace and, in turn, assessments, is often felt indirectly. These types of sales may be so numerous that typical traditional sellers in the area are forced to lower sale prices in order to sell their properties.
