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Saturday, September 20, 2014 |  Madison, WI: 65.0° F  Overcast
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Are high-end homes undervalued?
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Paskewitz: 'The more expensive your home is, the less likely you are to pay your full share of property taxes.'
Paskewitz: 'The more expensive your home is, the less likely you are to pay your full share of property taxes.'

Susan Paskewitz of Madison admits she's "sort of a nosy neighbor." The UW-Madison entomology professor (she specializes in mosquitoes) has long been curious about home values in her near-west-side environs. Recently, she noticed that one property on the market for $980,000 has an assessed value of just $660,000. That fed into her "growing sense that higher-priced properties are consistently underassessed."

To "test this hypothesis" (scientists!), Paskewitz randomly picked six houses around town with asking prices in excess of $1 million. She found that these prices were, on average, 62% higher than assessed values.

Paskewitz then sampled 22 homes on the near-west side listed on MLS or FSBO (For Sale By Owner) with asking prices of between $500,000 and $1 million. On average, the homes were priced 34% above assessed value.

Finally, Paskewitz ran the numbers on 20 homes with sales prices between $140,000 and $250,000. The asking prices averaged barely more than 2% above assessed value. (For her spreadsheet, see the related downloads at right.)

The obvious conclusion from this research, says Paskewitz, is that "the more expensive your home is, the less likely you are to pay your full share of property taxes." She calls it a "fairness issue," speculating that "even people who are underassessed will agree."

In response to an email from Paskewitz, west-side property appraiser Karen Karnel advised that some homes are listed "at the high end of their value." City assessor Mark Hanson adds that while list prices are useful indicators, the city bases its assessments on actual sales, which are then applied to comparable dwellings.

"We're always trying to reflect what a house is worth on the market," he says. The office also does after-the-fact analyses to make sure it's assessing properly. "For properties that end up selling, we're pretty much in line in all value ranges."

The city's approach means that if the homes now listed actually fetch the higher-than-assessed asking prices, the value of comparable high-end homes will also shoot up. Then Paskewitz can test her hypothesis that the underassessed will agree this is fair.

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