Now, when starting to examine luxury streets in McLean (such as Crest, Chain Bridge, and Ballantrae Farm), not only does one find numerous examples of homes that are quite probably significantly underassessed, relative to their GÇ£fair market valueGÇ¥, but interesting information as to just who is profiting from this (now not-so) hidden tax subsidy for the homes of the rich and (in)famous.
Richard B. Cheney, for example, bought a property for $1.35 million that is listed as settling on 12 January 2000. This is .9 of an acre on Chain Bridge Road which is one of the top-end streets in McLean, which is one of the richest portions of Fairfax County, which is one of the richest counties in the United States. As of today (the 2006 assessment), this property is assessed for $1.045 million, or less than 80 percent of what the Cheneys paid for the property over six years ago.
KEY NOTE: This discussion is 100% based on public records that are available to any and all via the worldwide web. For example, the Fairfax County Department of Tax Administration's Real Estate Assessment Information Site.
So, Dick Cheney's tax assessments for the past six years have been lower than what he paid for the property back in 2000. This is, of course, a time period in which the average Fairfax home owner has seen assessments increasing by far more than 10 percent per annum (generally far more). Now, the land assessment did go up by 25 percent this year ... while the assessment on the land portion of my assessment went up by 50 percent.
Now, note that there was a structure on the property when the Cheneys bought it. When the Cheneys bought the property, it had a tax assessment of $841,600 GÇô of which $413,200 was for a structure on the property, which the Cheneys immediately had torn down. The 2000 assessment of $841,600 then fell to $450,000 for just the land in 2001 (a $21,600 increase GÇô less than five percent GÇô over the 2000 land value).
To believe that the CheneysGÇÖ tax assessment has been reasonable over the past six years requires, in part, an assumption that the land was worth less without the structure than with it GÇô when the Cheneys' first action (in essence) after purchase was to tear it down. This is (sadly) a rather common real estate transaction, the property that is a GÇ£tear downGÇ¥. As any realtor or real estate investor knows clearly, a GÇ£tear downGÇ¥ is valuable for its land GÇô and the existing structure actually has negative value because it costs money to have it torn down and the debris hauled away.
From realtor acquaintances, they have estimated the Cheney's property's land value between $2.5 to $6 million (or even more). Or, to take it another way, that Cheney has been underpaying his 'fair share of real estate taxes' by anywhere from $15,000 to $50,000 (or more) per year -- year in and year out.
While the market has changed, less us again note that from the late 1990s to late 2005, the McLean area average easily 15 percent per annum increases in real estate values. And, the key point was not the structure GÇô but the land as McLean is GÇ£inside the BeltwayGÇ¥. If one were to take the CheneysGÇÖ $1,350,000 January 2000 purchase price as their own GÇ£fair market valueGÇ¥ assessment of the landGÇÖs value (as, again, what they did was tear down the structure on the land), then GÇô applying McLeanGÇÖs real estate market of 2000-2005 would suggest a GÇ£fair market value of $3-4.5 millionGÇ¥ as of 1 January 2006 (date for tax assessments), right in the sweet spot of my realtor acquaintancesGÇÖ estimates.
There are many others with tax assessments on their luxury homes that seem totally out of line with Gǣfair market valueGǥ GǪ
Frank CarlucciGÇÖs home on Crest Lane has an assessment -- for another example GÇô which states that his building value is $340,080. That is less than $14k higher than the assessed building value in 2000. Again, this is a period where the community saw 10-20 percent growth in real estate prices, year in and year out. One might have expected the property to have a
This is for a 5 bedroom, 6.5 bath, three fireplace, 2292 square foot (above grade) "Excellent" construction home with a tennis court, pool, and garage. (For contrast, my 4 bedroom / 3 bath / 1 fireplace, 1695 sq ft (above grade) "average" construction building is assessed at $351,780 value. And, sadly, no tennis court, pool, nor garage.)
And, this potentially serious 'undervaluing' of property assessments is not limited to these two ... similar can be found for Colin Powell (appraised value roughly 50% of sales prices in the neighborhood for comparable homes), Justices Thomas and Scalia, and GǪ
Those who are benefitting from the tax advantages of significantly low tax assessments are, it seems, clearly aware of this. In Forever the Negotiator: Brzezinski in a Stalemate Over a Sidewalk, we learn about this in a back hand manner
Based on the assessed value of the Brzezinskis' land -- $1.7 million, not including a house worth $489,000 -- the county could offer about $19,000 for an easement on the 240-foot-long strip. An easement would not preclude future subdivision (the land can be split for five homes). [The county] wrote that it would enhance the land's value, because a developer would be spared the cost of building the sidewalk required by law.Brzezinski was not satisfied. He responded, asking, among other things, why the easement compensation wasn't based on the "actual selling price" of area homes
Note, Zbignew Brzezinski challenged Fairfax County's offer for a small part of his property with a statement that the assessment was not truly 'fair market value' because it didn't reflect the "actual selling price" around him. He understood that his taxes were anything but based on the GÇ£fair market valueGÇ¥ that the law requires.
How many $millions in tax revenue is Fairfax County leaving uncollected by not fairly (and unevenly) assessing luxury homes?
Too many people who could afford to be paying their fair share are not being asked to. This is the case for Zbignew ... Colin ... Dick ... Frank ... and too many other rich and famous residents of McLean.