Private Home Sales and Property Taxes

In several states across the U.S., sale prices for private home sales remain confidential. These nondisclosure states may enable owners to secure lower property tax bills by withholding crucial information on sale prices.

“Property taxes are typically imposed by reference to a property’s assessed value,” noted Assaf Harpaz, Assistant Professor at the University of Georgia School of Law.

When sale prices aren’t publicly recorded, it limits access to vital data necessary for accurate property assessments. This could allow some owners to benefit from lower tax assessments.

Regulation Differences Across States

Private home sales are permissible nationwide and overseen by the National Association of Realtors. However, nondisclosure states keep sale prices confidential, thus affecting property assessments. In such states, assessors must guess sale values, which can lead to errors.

“Institutional, sophisticated, and wealthy actors may have a greater ability to leverage this lack of public data,” said Harpaz.

Without public sale data, property assessments may favor those with access to private transaction details. This can lead to inaccurate appraisals and unfair tax burdens.

Research Findings on Nondisclosure States

Sergio Garate, a researcher at Emory University, emphasizes the consequences of nondisclosure laws. In these states, tax assessors frequently rely on prior assessments and alternative data, increasing the chance of errors.

“Missing information leads to valuation errors, benefiting some owners,” Garate explained.

Garate’s study shows that nondisclosure practices create inequalities in taxation, appraisals, and mortgage performance.

Real-Life Example: New Mexico

New Mexico’s shift from full nondisclosure to partial disclosure in 2004 resulted in a 4% increase in annual tax revenue. This change highlighted how previous nondisclosure laws had potentially suppressed tax revenue.

When sale data is unavailable, tax burdens can shift unfairly. Properties assessed below market value might cause others to shoulder a more significant tax burden.