Is our problem the tax rate or undervaluing property?

As seen in the 9/25/20 Ledger column

Since taxes seem to be involved in most real estate conversations, let’s talk tax.

This being a real estate column, it would be more appropriate to discuss property tax than sales tax or income tax, although the state income tax of other states and the absence of an individual income tax is helping to drive the local property tax skyward in Nashville.

Last week, former Mayor Bill Purcell spoke via Zoom to a group of real estate agents. At the moderator’s request, his presentation was “Bill Purcell Explains Everything,” and he did. He is of the opinion that the financial difficulties experienced by Nashville have been resolved and, even with the tax hike, Nashville will have among the lowest tax rates of any major city in the country.

He added Tennessee is one of the lowest-taxed states in the U.S.

Besides the rate itself being low, appraisals of properties by the city have always been low, for the most part. If, for some reason, Metro is more excited about the homes’ value than their owners, there is the Board of Equalization to remedy the disagreement.

What citizens rarely argue is the situation in which the city has undervalued their property. Such is the case with the grand estate found at 200 Hillwood Boulevard.

Last week Benchmark’s newest star, Victoria Anest, represented a buyer who purchased the property for $4.425 million, a healthy number by anyone’s standards.

Had Metro attempted to appraise the property for $4,425,000, there would have been rending of clothes and gnashing of teeth. Even Bill Purcell could not have explained that one away. One reason would have been the argument that it last sold in 2015 for $1,795,000.

One might conclude that with a deed recorded in the Metro Courthouse for the $1,795,000 number, it should appraise for that very amount. That would be the wrong conclusion, as the tax records reveal that the city felt the 7,664 square foot mansion and its 1.83 acres were worth $553,600 less than the $1,795,000 the owner paid five years ago. That assessment is now $3,183,600 less than the latest sale price.

Having never claimed mathematician status, I would be slow to argue why the property would be assessed at such a low value and would think the $1,241,400 appraisal would not be a number that would fall into the arbitrary realm.

It seems to be a value reached after some thought and research. After some calculation, it is only 69% of the sales price of the home in 2015.

To make matters worse, it is 28% of the sale last week. In the minds of those less scholarly than others, 34% of 28% is less than 34% of 100%.

So, is the tax hike the answer or would accurate appraisals solve the problem?

One of the favorite ploys of many homebuyers is to offer the tax appraisal of the house. “If that’s all the city thinks it’s worth, that’s all I am willing to pay for it,” they argue.

Those people are often referred to as renters. If they owned homes, they would not accept the Metro tax appraisals a sales price for their home.

Cathy Cato Renken, a brilliant, well-respected Realtor, co-listed the home at 200 Hillwood Boulevard with her broker, real estate legend Rick French. Her firm’s name French King Fine Properties described Renken’s career, as her listings are always fine homes.

She described the house as an “exciting expansion and renovation with International flavor” with a world-class kitchen. “Walls of glass merge inside and outside public places,” she adds.

It certainly came as no surprise to Renken that Victoria Anest would deliver her buyer, as this palace is fitting the usual Anest clientele.

Of course, the house has a pool and a Bocci court. And while we are on the subject of courts, there is a three-car motor court.

Selling for $577 per square foot, the house has six bedrooms, five bathrooms and one half-bath in the main dwelling. A second structure has 946 square feet with a bedroom and a full bath.

Back to former Mayor Purcell, he says there are three factors that entice people to relocate – safety, quality of life and education – and Nashville has all three. It will be a challenge, however, to sustain all three if there is a cap on the growth of the local spending.

Perhaps there should be a charge to enter the city. It seems that most of the residents of San Francisco have decided to move here. Many of those are fleeing the fires and the smoke that accompanies it, others leaving for political reasons, and some for financial gain. There are Facebook pages they use to describe the idiosyncrasies that characterize life in Nashville.

A politically conservative real estate broker says he fears many liberals are leaving red states and bringing their political agendas here. He worries they will overtake the state.

Conversely, one of the Californians says he is leaving the blue state in search of political redness and feels the state offers political solace, even with the blue dot that is Nashville.

He hopes, he says, that if enough of his compatriots move to Nashville, they can swing the city to red.

Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty and can be reached at richard@ richardcourtney.com.