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Real Estate Government Power?

Four government powers- and you’ll need to know.

  1. P for Police Power
  2. E for Eminent Domain
  3. T for Taxation
  4. E for Escheat

What is Police Power?

Police power is how the government regulates real estate. Examples of police power include zoning laws, building codes, fire codes, rent control, safety hazards, and tenant rights.

Police power is not designed to take property away from you. (unlike eminent domain)

It’s there more to set standards on how the property can be used. That is why compensation is not paid to property owners affected by police power. (unlike eminent domain)

Police power allows the government to place restrictions on the use of private property. 

 

Real Estate Taxation

Taxes are to meet the public needs of government.

 
 
 
 
 
 
 
 
 
 

Taxation

The main source of revenue for cities and counties.The most universally known special assessments are charges levied against lands when drinking water lines are installed; when sewer lines are installed; or when streets are paved with concrete or some other impervious surface.

However, special assessment tax levies can be made for other purposes including police or fire protection, parking structures, street lighting and many of the other purposes permitted by state and local government statutes.

 
 
 
 
 

Al Valorem – According to Value (Latin for “according to value”)  

(ad valorem tax) relies upon the fair market value of the property.

based on value

 

The assessed tax value of the property is calculated using local real estate data and is usually a percentage of a property’s fair market value, determined by multiplying the property’s market value or appraisal value by an assessment ratio established by the local taxing authority.

It is possible for the assessed tax value to be either higher or lower than a property’s actual market value.

If a property owner believes that his property has been assessed at an unreasonably high value, he can request a reassessment.

 

Assessor

An official (or sometimes the treasurer) who determines the assessed valuation of real property.

Assessed Value/Assessment

Assessed Value is a percentage of true value. 

 
 
 
 
 
 

Water and Sewer Departments are non profits.

 
 
 
 
 
 

A special assessment is a term used to designate a unique charge that government units can assess against real estate parcels for certain public projects. This charge is levied in a specific geographic area known as a special assessment district (SAD).

 
 
 
 
 

Average Property Taxes by State

The tax rate is determined by dividing the amount of money that is needed by the total assessed value of all properties.

money needed ➗ total assessed value of all properties = tax rate

Check out the most current effective property tax rates and median property tax bills per state, according to the U.S. Census Bureau and the nonprofit policy research firm Tax Foundation.

 
 
 

 

 
 
 
 
 

Equalization factor

A process to correct taxing inequalities.

 
 
 
 
 

Mills

This method bases the tax rate on so many tenths of a penny (or mills) in taxes for each dollar of assessed value.

 
 
 
 
 
Dollars per hundred

This method bases the tax rate on so many dollars of tax for each $100 of assessed value.

Dollars per thousand

This method bases the tax rate on so many dollars of tax per $1,000 of assessed value. You need to be familiar with all three methods for exam purposes.

 
 
 
 
 

Calculating taxes due

You can calculate taxes due using one of the following three methods, depending on how the municipality calculates taxes or how the exam question is asked.

house tax or millage rate is an ad valorem tax on the value of real estate. The tax is levied by the governing authority of the jurisdiction in which the house is located.

 
 
 
 
 

Homestead Exemption

Some states have a homestead provision that exempts a specified dollar amount of a property’s market value from assessment for property taxes.

For example, in a state with a $50,000 homestead provision, only $150,000 of a $200,000 home would be subject to property taxes.

What is a Homestead Exemption?

A homestead exemption is a legal provision that helps shield a home from some creditors following the death of a homeowner spouse or the declaration of bankruptcy.

The homestead tax exemption can also provide surviving spouses with ongoing property-tax relief, which is done on a graduated scale.

 
 
 
 
 
 

Special Assessment – Improvement Tax

The special assessment relies upon a special enhancement called a “benefit or improvement” for its justification.

Special assessment is the term used to designate a unique charge that government can assess against real estate parcels for certain public projects.

This charge is levied in a specific geographic area known as a special assessment district (SAD). A special assessment may only be levied against parcels of real estate which have been identified as having received a direct and unique “benefit” from the public project.

Only those who benefitted from an improvement pay the special assessment.

Creates a priority lien on the affected property usually second only to ad valorem property tax.

 
 
 
 
 
 
 

Transfer Tax

A tax charged by the state to transfer an interest in real estate which helps establish an accurate value for tax assessment purposes.

Property Tax

A tax based on the assessed value of real property; 100% deductible on income tax.

 
 
 
 
 
 
 

Tax Liens

When property taxes or special assessments remain unpaid, they become a specific lien against the property which takes priority over other liens.

 
 

Tax Sale

The sale of real property to satisfy unpaid property tax liens.

 
 
 
 
 
 

Board of Equalization

The state board of equalization meets each year to determine if each county has assessed at the percentage of actual value prescribed by law.

Treasurer

A  official who collects the taxes and determines the budget for schools, road maintenance, improvements, etc.

 
 
 
 
 

Eminent Domain

Eminent Domain

Under eminent domain, the government can appropriate property if they feel it is for the community’s greater good. But the owner of any lands claimed under eminent domain is entitled to reasonable compensation, usually defined as the fair market value of the property. Compensation for the property is paid through the process of condemnation.  

In some jurisdictions, the state will also delegate eminent domain power to individual public and private companies. For example, this allows utilities to bring eminent domain actions so they can run telephone, power, water, or gas lines.

However, there are times when a property owner feels that they were not appropriately compensated by the government when the powers of Eminent Domain were applied to their property. In these cases, the property owner can file for Inverse Condemnation. Inverse Condemnation sounds tricky, but basically, it just allows a property owner to file a claim against the government to recover just compensation for the taken property.

Eminent Domain, Condemnation

Only the government can eminent domain.  

Eminent Domain

The government can take privately owned property for the good of the public. Acquire personally owned real estate for the benefit of the public.

The owner is paid Just Compensation

Condemnation

The judicial or administrative action of eminent domain.

Condemnation is compensation to the property owner. Known as “Just Compensation”.

A government entity can take your property by eminent domain. The only person who can do Reverse Condemnation is the property owner.

Compensation usually follows the court action of condemnation. (eminent domain)

A county airport took several homes to expand its runway through the government power of an eminent domain.

When the county took several streets through eminent domain to extend an airport runway, they left one house.  The owner is experiencing extreme noise and shaking due to the expansion. The homeowner may be able to get the county to take the property through reverse condemnation.

Only a homeowner can apply for reverse condemnation. It’s forcing the government (reverse eminent domain) entity to take your property.

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Can a condo complex eminent domain three houses adjacent to its parking lot to expand their parking? NO

 
 
 
 
 

Reverse Condemnation

The homeowner is forcing the government to use Eminent Domain to take his/her property.

Only the homeowner can file for reverse condemnation

A man at the end of an expanded airport runway could attempt Reverse Condemnation.

 
 
 
 
 

Inverse Condemnation 

a term used in the law to describe a situation in which the government takes private property but fails to pay the compensation required by the 5th Amendment of the Constitution, so the property’s owner has to sue to obtain the required just compensation.

 
 
 
 

Escheat

The government takes your property if you die without a will and no heirs can be found. (Or, a property is abandoned.)

Land cannot be ownerless.

 

Example of Harrison County Property Taxes