On July 14th, the Providence City Council’s Finance Committee voted to increase the property tax rates for residential and commercial property and eliminate the homestead exemption for owners of 1 - 5 non-owner occupied properties.   The full City Council will vote tonight, July 26th. This week Rich and Chas had Sally Herreid in studio to talk about the proposed tax hike. Sally lives and owns investment property in Providence, and is a Realtor in our Providence office.  If you are the owner of investment property in the city of Providence, you should attend this meeting.  The mayor was unable to call in to voice his opinion but assured me that he will veto this increase, but in the meantime let your voice be heard as well. Here are some questions from the RIAR website regarding the proposed tax increases:

How will these increases affect me?

• 25.5% increase in residential property tax rate: The residential property tax rate would increase from $24.21 per $1,000 of assessed value to $30.38.
• 88% rate increase for small landlords: The Council will vote to repeal a homestead exemption for non-owner occupied rental properties of 1 - 5 units. If approved, this will result in an additional increase in the actual property tax rate for owners of these properties. This will mean an increase from the current discounted rate of $16.14 of assessed value to $30.38 or more than 88%.
• 17.8% increase in commercial property tax rate: The commercial property tax rate would raise the commercial rate from $28.60 per $1,000 of value to $33.70
• When will these increases take effect? Property owners will receive revised tax bills in August, (July 16th Providence Journal).
• Why is Providence punishing small landlords? In the words of Finance Committee Chair Igliozzi (July 20th Providence Journal), “They are business people, and they will probably not make as much profit as they are use to, and they are unhappy”. In other words, small landlords are greedy fat cats who are rolling in dough. In the same article, Chair Igliozzi further claims that a tax break that has been in affect for years is suddenly illegal.

This week’s Real Estate Insight: We can fight City Hall!  Tell your elected officials that you oppose these property tax increases.  Make their phones ring off the hook.

• Attend the Providence City Council hearing on July 26th.
• Call Mayor Cicilline: Telephone: (401) 421-2489
  Email: mayor@providenceri.com
• Call City Council   Telephone: (401) 521-7477
  Email: Council@providenceri.com

Implemented last spring by Fannie Mae and Freddie Mac, The Home Valuation Code of Conduct (HVCC) banned lenders from selecting appraisers to valuate homes in the deals which they are brokering. The purpose was to prevent inflated and fraudulent appraisals which played a part in the bubble leading to the mortgage crisis. While The HVCC does not require lenders to use appraisal management companies, many choose them to ensure compliance with the code.  Builders, Realtors and   independent appraisers have reported dissatisfaction with the work produced by them. Fannie’s new guidelines will address issues that have arisen, including the widespread use of inexperienced appraisers unfamiliar with local market conditions. Effective immediately Lenders must use appraisers who “have the requisite knowledge required to perform a professional quality appraisal for the specific geographic location and particular property type, as well as access to “necessary and appropriate data sources for the area in which the appraisal assignment is located.”. If an appraiser believes a foreclosure sale or a short sale is an appropriate comp, the appraiser is required to consider any differences from the subject property, such as the condition of the home and whether any stigma has been associated with it. If comparable sales data is not available when appraising new construction, appraisers may verify recent sales of new homes by viewing a copy of the HUD-1 from the builder. Fannie Mae will continue to require at least three comparable sales and comps from the property’s neighborhood are preferred. Comps located in competing neighborhoods are allowed, but appraisers must indicate the comparables are from a different neighborhood, and address any differences that exist.

This Week’s Real Estate Insight:

As is often the case, the HVCC “cure” seems to be worse than the desease it was created to treat. Hopefully the new guidlines will address the delays and frustrations it has added to so many transactions.