Housing News

Property Taxes and the CLR

We explain the reason behind such vague concept.

Two years ago, Cumberland County created the seven-member Common Level Ratio Task Force. According to The Sentinel Online, “The seven-member Common Level Ratio Task Force recommended to the commissioners in mid-November that they immediately reassess property values in the county because its common level ratio had dropped below 85 percent to 82 percent.The ratio is the measure of the difference between assessed property values and what the properties are worth on the market. Dropping below 85 can open a window for larger properties to appeal and win tax breaks, members of the task force said.”

Less information is found regarding the CLR. When computing for your real estate taxes, you need to know your area’s common level ratio factor or the CLR. It is the equalization ratio used to adjust the value of the assessed home in a specific area to its fair market value estimation. The CLR is typically calculated by your county’s tax board. To determine this, the concerned offices along with property assessors conduct a survey on property sales in a municipality. The sale value is then compared to the assessed value of the homes and the ratio is identified for the entire district. Therefore, when the area is reevaluated, the CLR also changes.

The main purpose of the CLR is to adjust fair market values in each county so that the values turn out to be more realistic (since a ratio between actual recent sales and assessed values are taken). Usually, the CLR is officially endorsed on the first day of the year while it takes effect on the following year thereafter. For example, certified CLAs in January 2008 will be used for the fiscal year 2009. Be aware that the dates vary in various states.

The two most common uses of the CLR are during tax computations and tax appeals. In tax computations, the assessed value is multiplied by the CLR to determine how much the property is worth. For example, in Allegheny County, PA, the CLR is equal to 1.16 until June 2009. An assessed value of $200,000 shows that the house is worth approximately $232,000.

When doing your tax appeals, the CLR is often used for clarification in your property assessment that is deemed unreasonable and unfair. To do this, the common level range is first identified. For example, if the range is from 70.05 percent to 98.05 percent, the CLR must fall within the scale or else there will be a reassessment. An assessed value of $100,000 divided by the real sale value of $95,000 gives a CLR of 1.053 or 105.26 percent. In this case, the assessment will be reduced because it is beyond 98.5 percent. However, if the CLR falls below 70.05 percent, the assessment will be increased by the tax board.

So this explains why Cumberland County is calling for reassessment. Back then when nothing was heard of the coming recession, some could actually take advantage of the situation and be free from paying their property taxes when no action regarding assessments.

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