Million-Dollar Home Club 

Million-Dollar Home Club

It’s back. The dreaded property reappraisal that is, and this time Shelby County Assessor Rita Clark and her staff are promising extra-close scrutiny of the biggest and most expensive homes. The reappraisal is due to be finished in April 2001. If homeowners feel like they’ve been through this before well, they have. It’s the second reappraisal in three years and the fourth in ten years, following the decade of the 1980s when the assessor’s office (under different leadership) failed to complete the job. Normally a reappraisal is done every four years, but Shelby County is on a three-year cycle this time because of delays in the last reappraisal. By state law, appraisals are supposed to be at market value. In the strong economy, home sales prices have generally been going up, making a reappraisal tantamount to a tax increase for many homeowners. The difference between a $200,000 house and a $300,000 house in the city of Memphis, for example, is $1,727 a year in property taxes. But the 1998 reappraisal, like its forerunners, missed the target on so-called “high-end” homes. In a spot survey in Memphis magazine two years ago, some houses that sold for over $1 million were appraised at half that amount or less. Other wealthy homeowners got their appraisals reduced on appeal under questionable circumstances. The resulting publicity led to a nasty break-up of Clark and one of her top appraisers. The 2001 reappraisal is being led by Cheyenne Johnson, a 14-year veteran of the assessor’s office. In an interview, she and Clark said “we are doing everything we can” to identify possible errors in high-end appraisals including field checks and verifying square footage, permit information, and comparable sales. A complete report on high-end appraisals will be finished by the end of the year. The assessor’s office defines “high-end” as over $600,000 and 4,000 square feet. There are an estimated 6,000 high-end parcels in the county. “An appraisal is an opinion of value,” says Clark, elected to a second term in August. “There is no way a mass appraisal can adjust to every situation. The problem with the high end is that you just don’t have a large number of comparable sales.” In September, the Multiple Listings Service (MLS) of the Memphis Area Association of Realtors showed 44 homes either sold or listed for over $1 million since 1998. Twelve homes had been sold, two more sales were pending, 26 were still on the market, and four listings had been taken off the market. This list does not include new construction. If this year’s Vesta Home Show is any indication, million-dollar homes are becoming more common in Shelby County. Five of the six homes on the tour were priced at over $1 million. “We have had more sales over $1 million between the last reappraisal and this one than we have ever had,” says Robert Trouy, manager of residential maintenance for the Assessor’s office. With two exceptions, sale prices were higher than the 1998 appraisal values, which is not surprising since the numbers are nearly three years old. Given the general rate of housing inflation since 1998, Clark and John-son were satisfied with most of their valuations. If a sale falls within 80 to 110 percent of the 1998 reappraisal, it is “validated” by the office. In some cases where sales price and appraisal were far apart, they found that the sale had not been validated because there were unusual circumstances such as a family or corporate relationship between the buyer and seller, inclusion of personal property, or a large piece of prime property that can be subdivided for future homes. If the sale was indeed an arms-length transaction and the sale price and appraisal are still far apart, then Johnson and Trouy try to find out why. This may include a field inspection. “By law we can’t go in the house but we can go on the property,” Johnson says. If the office concludes that its appraisal is too low, it can make an adjustment in the next reappraisal but not until then. To illustrate some of the issues in high-end appraisals, Memphis magazine looked at public records for three homes in different parts of Shelby County that each sold recently for more than $1 million. Then we asked Clark’s staff to comment. ¥ 517 East Parkway South. This Midtown home built in 1923 is currently appraised at $459,000 by Clark’s office. It sold for $519,000 in 1995. The owners took out permits that year for remodeling valued at $143,000. They more than got their money back. Last year the house sold for $1,370,000. Trouy explains that the current appraisal is based on the 1995 sale and improvements. Midtown, he says, is especially hard to value because of the variety of housing conditions and the scarcity of high-end sales. Based on the most recent validated arms-length sale, however, this appraisal is likely to jump next year, he said. ¥ 5885 Garden River Cove. This house was built in 1996 in one of the most expensive sections of East Memphis. The building permit for the new construction was for $500,000 plus $90,000 of improvements, but the house appears to be worth much more than that. It is appraised at $758,600. The house has been sold three times in the last two years, and on two other occasions the owners filed quit claims, which is a way to transfer property to an estate. The first sale, in January 1999, was for $2,999,000; the second sale was for $2,700,000 in April of this year; and the most recent sale, in June, was for $2,750,000. The owners have included a corporate CEO, a physician, and a merchant. Trouy was puzzled by the sales, which were not validated. Other homes in the neighborhood sold for $150 to $200 a square foot, but this one sold for around $325 a foot. “You will rarely see sales in excess of $200 a square foot in Shelby County with the exception of custom houses like the Quantum House,” he says. ¥ 2847 Keasler Circle West. This house in East Germantown sold for $664,300 in 1996 and is appraised at $646,400. In 1999, it sold for $1,350,000, although there was no permit activity between sales. So the house seems to have doubled in value in three years. Trouy says this could be due to general growth in the Collierville/Germantown area. The appraisal is likely to be much higher next time because of the sale price and fact that there are more comparables. Here is a complete listing of homes that sold for over $1 million in the last two years, with the 1998 appraisal in parentheses. 1. 163 Cloister Green Cove, $1,338,500 (sale pending) 2. 2556 Houston Levee Road, $1,197,000 (sale pending) 3. 517 East Parkway South, $1,370,000 ($459,000). 4. 6381 Swan Nest Cove, $1,000,000 ($792,000) 5. 5965 River Oaks Road, $1,000,000 ($1,048,200) 6. 5849 Garden River Cove, $1,050,000 ($894,000) 7. 5885 Garden River Cove, $2,750,000 ($746,300) 8. 2412 Carter’s Grove Lane, $1,200,000 ($1,234,000) 9. 9485 Inglewood Cove, $1,000,000 ($745,700) 10. 2590 Johnson Road, $1,150,000 ($673,800) 11. 9282 Ingleside Farms Rd. N., $1,175,000 ($858,000) 12. 2847 Keasler Circle W., $1,350,000 ($569,000) 13. 9293 Poplar Avenue, $1,362,608 ($233,300) 14. 835 Bray Station Rd., $1,425,000 ($673,000) [This story originally appeared in the November issue of Memphis magazine.

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