When In Doubt, Disclose

By Edith Lank

August 17, 2014 5 min read

Dear Edith: Ten years ago, I legally added a 600-square-foot addition to my suburban home. I obtained all the necessary permits. However, we failed the final inspection due to some loose outlet wall plates. It only took me a few seconds to tighten the screws but the inspector left and told me to call the village for a re-inspection.

Since the inspector was being petty and silly, I didn't bother calling for the re-inspection. I realized a few years later that my yearly tax bill did not reflect the additional square footage so I am not being assessed the true value of my home.

What happens when I try to sell my home and they realize I had not been properly taxed for 10 years? Is this something I must disclose to the buyer? — R.

Answer: When the question starts with "Is this something I must disclose" we don't need to wait for the rest of the sentence. The answer is almost automatically "yes".

I don't know where you're located, so I don't know exactly how far back the tax office can go back to amend your bills, but it's probably not for the whole 10 years.

Not Arm's Length

Dear Edith: Per your recent column, do you not see any concerns (IRS-wise) with a person selling his home to a relative for 50 percent of its value? Not an "arms length sale?" — M. W.

Answer: Ownership of real estate gives you a bundle of legal rights, and one of those is the right to give that real estate away. No law says that every sale has to be arm's length. It's possible a gift tax return would need to be filed for the value of the other half (less that year's exclusion amount), but it's not likely any federal tax would actually be due.

Testing the Water

Dear Ms. Lank: To complete the sale of my house, I need to have the well water and septic system tested. Assuming both are fine, if this deal falls through, would I have to repeat the tests for the next buyer? — via askedith.com

Answer: Your next buyers, or their lending institution, may require re-testing — or they may not. Standards vary in different localities. In my area, test results are considered accurate for 90 days.

Suing About Assessment

Dear Edith: This spring the town reassessed my home and a lot of others. I used assessment tools online and a local real estate agent to get printed five reports to contest the town's assessment. (One report was even from a Realtor that serves on the assessment board.)

In each case, the reports concluded the town's numbers are wrong. But in two applications for review, my information was not accepted with the comment that "The evidence provided failed to override the assessment. The current assessment better reflects the equitable market value of the property."

I've contacted the Realtor that did a review of my home with an on-sight inspection, who told me the town has all but rejected most peoples' proof. The values of my proof stated the true value is $20,000 less than they think.

Again, let me state it has come to my attention via reliable sources that I am not alone in having this problem. So, my question is how can I fight this? I think that, since this is so widespread in the town, is it possible to start a class-action suit and not fight this alone or small claims court or retain my own real estate lawyer? — E.

Answer: The whole point of property taxes is to raise money needed for the town's services. If all the property in town were assessed lower, the tax rate would have to be set higher in order to raise the same amount. States may limit, though, how high a local tax rate can go.

For your particular situation: It sounds as if most of your estimates came from Internet sites, and those cannot be considered as "proof of true value." They're just not all that dependable, and often not up to date.

It sounds as if your question comes down to "Can I sue?" For that the answer is always yes, anyone can sue anybody any time. Here are better questions:

—"What am I looking for?";

—"Who should I sue?";

—"Do I have a good case?";

—and, especially as you're interested in a class-action suit, "Will a lawyer consider this worth taking on?"

To answer that one — consult an attorney.

Edith Lank will respond personally to any question sent to www.askedith.com or to 240 Hemingway Drive, Rochester NY 14620

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