Bonds - How they Affect Sales Price and Assessments
Land developers often use 1911 and 1915 Improvement Bonds
to finance off-site improvements such as streets, curbs, gutters,
storm drains, sewers and water systems. If not paid-off by the
developer prior to sale, the bond debt becomes a lien against
each of the properties sold, and buyers of the property must
assume the principal remaining balance of the bond specific to
their property (along with the annual payments required to retire
the bond). Bond debts then are simply construction loans.
When buyers assume construction loans or other loan debts
(such as bonds) at purchase, those debts often affect the nominal
sales prices of property. Because otherwise identical properties
can sell for what might appear to be a very wide range of prices
depending on how they are financed, the law requires the Assessor
to convert all non-cash items exchanged to their cash-equivalent
when determining sales prices. The cash-equivalents of all non-cash
items are then added to whatever cash exchanged hands in order
to derive the full cash equivalent purchase price of property.
This is done to ensure that like properties share like assessments,
that all property is assessed at its full cash value as prescribed
by law, and so that the property tax burden is spread fairly
as a result.
If assessments were based only upon the cash that exchanged
hands, the assessed values of otherwise identical properties
would vary greatly depending on how sales were financed. Properties
purchased with large loan assumptions would pay far less property
tax than the identical properties purchased with cash or financed
with new loans where the buyer received all cash. That is neither
fair nor logical.
Because Bonds are construction loans assumed by buyers, the
Assessor must add the cash equivalent value of the bond debt
(often the bond debt’s principal balance) to the sales price
in order to determine the cash-equivalent sales price. If that
cash-equivalent sales price is supported by other comparable
sales of similar property, then the Assessor must enroll the
cash-equivalent price as value. If comparable sales do not support
that adjusted price, then the Assessor is obligated to enroll
market value.
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detailed discussion of How Bonds Affect Sales Prices and Assessments.
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Madera County Assessor's Office
200 W. 4th Street
Madera, CA 93637
Telephone: (559) 675-7710
Fax: (559) 675-7654
Office Hours: 8:00 AM to 5:00 PM
Monday through Friday
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