Homeowners hit with unexpected back taxes
Earlier this year, the certified letter arrived. The return address: Clackamas County Assessor's Office. Inside was a bill for nearly $3,000 in back property taxes.
For Kari Petersen and her family of three, that letter was more than a bill. It was a bomb. A run of medical expenses in 2014 caused the Petersens to downsize to a modest house in Oregon City — with a bathtub repurposed from a mobile home and an original 1940s toilet. And even with that, the family was maxed out.
So the unexpected county tax bill going back three years "put us up against the wall," Petersen says.
Her experience reflects a growing trend that is hitting some Oregon homeowners hard: the process by which county assessors go after back taxes after belatedly realizing that a home is worth more than they thought.
The term? "Omitted property tax."
Some counties have taken up the practice with gusto. In Clackamas County, for example, the assessor sent out just 17 notices for omitted property taxes in 2012. But in the first half of 2017, the office sent out 496 such notices, a more than 50-fold increase.
In Washington County, the assessor's office sent out 480 notices in the first half of 2017, more than its total for all of 2016.
How is this vast growth possible?
In the old days, owners would have to physically invite an assessor into their homes to have them discover unreported home improvement projects and other omitted property. With small staffs to inspect and evaluate hundreds of thousands of properties, assessors simply could not keep up.
Today, however, assessors don't need an invitation to a home to get a peek into what has been going on. They've already got that ability without homeowners' consent or knowledge, thanks to internet postings and listings.
RMLS, Zillow, Trulia, Redfin, Realtor.com, Facebook, Craigslist and satellite images all provide valuable clues to assessors that homes may have been improved without proper notice. Then there are the more traditional means: phone calls from neighbors, brokers, prospective buyers and even the homeowners themselves.
Whatever the method, the results are clear.
"It's a huge increase" in efforts to correct property tax values that assessors had earlier missed, says Steve Anderson, a former broker and tax appeal administrative law judge who now consults with aggrieved homeowners about their tax bills.
Consultant seeks reductions
Anderson, of First Class Properties, often can't help people hit with omitted property tax notices. But sometimes he can. In Petersen's case, he worked hard to figure out what drove the surprise assessment boost.
The family had bought the house from a flipper — which is normally a red-flag warning of an impending property tax increase, according to Anderson. Flippers often do unpermitted work, Anderson says. But in this case, the crew hadn't done much to the house other than replace the foundation.
Similarly, the family had put on a new roof and replaced a chainlink fence with a more attractive picket one. And they had repainted the upstairs and downstairs. But none of those improvements should trigger a finding that the asssesor had forgotten to bill somebody; rather, they are considered simple maintenance, Anderson says.
What probably drew the assessor's attention? A huge jump in value. The home flipper had purchased the home for $55,000 before reselling it to the Petersens for $217,000.
Anderson met with the county assessor's staff, giving them a tour of the house and showing how little had been done to the house since the couple bought it. In the end, the tax hike was cut in half. And their prospective tax bills going forward would be cheaper, too.
The investment of $350 for Anderson's services was well worth it, Petersen said. "We're glad that we came across Steve," she says.
Many other homeowners are glad, too. County assessors' efforts to boost revenue have increased Anderson's business, with complaints about receiving an unexpected property tax bill becoming comonplace.
"I used to get one of these a month," Anderson says. "And now it's like one a day."
He says the complaints often are from people who bought a home a few years before, only to realize their tax bills have been inacccurately low and that they now must settle their debt with the county.
"I had one case in West Linn where the property taxes doubled because of the work done on the property by the previous owners," Anderson
says, "and no one told the buyer anything about it whatosever."
Assessors often hear from angry property owners who are unhappy to learn their property value has gone up and that they still owe money from years ago because the property tax bill they received was too low.
Assessors tend to reply that they are the tax collector for schools and local agencies and that without them, classroom sizes would be even larger.
"This is what we do," says Washington County Assessor Rich Hobernicht.
Moreover, the law on collecting omitted property taxes doesn't really give assessors a choice about whether to update outdated tax assessments. The law says assessors "shall" issue such notices — a requirement — not merely that they have the option.
"The assessor's responsibility is whenever we discover, receive credible information or have reason to believe property has been omitted from assessment and taxation ... we are required statutorily to give notice to the owner of the intent to add the value to the roll," says Clackamas County Assessor Bob Vroman
Michael Vaughn, the Multnomah County assessor, says officials have a duty to collect the information and bill people who haven't adequately reported new property value. And they are only as good as the information they receive — sometimes, assessors say, they have to wing it.
"About 60 to 70 percent of the property owners won't let us inside," Vaughn says.
And while homeowners may get permits showing the improvements done on a property, local agencies often are slow to turn those in. In some areas, they mail information about the permits individually to the county assessor. Those letters must be opened and manually processed — a recipe for lengthy backlogs in smaller counties.
Vroman and Hobernicht, his counterpart in Washington County, say they can't explain their offices' increases in omitted property notices over the years, other than that the tools have imprroved.
In Multnomah County, unlike Clackamas and Washington counties, the numbers of omitted property tax notices have not gone up over the years. Vaughn says the county tries to be reasonable and understanding, reserving its most significant tax penalties for property owners who intentionally try to hide things from the county.
That's where the county has racked up significant successes. One enterprising staff member, for example, realized that Fred Meyer's corporate parent does not report major acquisitions of equipment or other improvements in a timely way. Audits of the chain's stores have turned up millions of dollars in property taxes owed that have boosted Multnomah County coffers.
But even if it's understandable, it doesn't make the process any more palatable to homeowners suddenly hit with a bill through no fault of their own.
Petersen, the Oregon City homeowner recently hit with an omitted property tax notice, says her experience made her realize that assessors' property tax rolls are perpetually behind, and property owners are paying for it.
"That's really challenging for homeowners to all of a sudden come up with extra money because the county is behind," she says. "If we had known ahead of time, we could have started budgeting."