5 ms·

Who determines the 'real' value of an asset, and how?

by thedirt0115 9y ago

wetpaws 9y ago
Market correction does :)
- thedirt0115 9y ago
  Well yeah, in practice, we can say an asset's value is what the buyer and seller agreed upon for the price, but I'm asking about valuing it while it's being held for taxation purposes. This is easy for stocks, etc, which are homogenous units that have other sales going on all the time, but for a house, for example? Comparisons are hard in practice! No house I've bought/sold has come in at the government's valuation.
  - mjevans 9y ago
    In the case of real-estate or other location dependent properties, there's often an assessment process of some sort. As a simple means the government could also act as the 'auction house' for properties and entertain prospective bids on a property. The median of those bids could be used to set the asking price if it's higher than the last public valuation of the property (this is mostly to discourage front companies down-bidding to cheat taxes). For more fungible items the current market valuation seems much more obvious.
    - sokoloff 9y ago
      I've long felt that the appeals process for a real estate tax appraisal should include the owner's option of, "Deal! I'll sell it to you [the city/town/county] for 90% of the value you just appraised it for, subject only to being eligible for a Certificate of Occupancy [which cannot be unreasonably withheld]." Optionally, add a provision that, if the town objects, the owner names a new price for the appraisal that the town can either accept as a valid appraisal or purchase the property for 111% of the owner's figure.
      - nikanj 9y ago
        In Vancouver we have the opposite: realtors call you weekly and promise you 1.4 million cash on the spot, while the tax value is 600k. Can’t raise taxable values to be realistic, as a lot of older folk are sitting on fixed income in multi-million dollar homes.
        sokoloff 9y ago
        It seems that when prices move in this direction, you could raise the taxable value and simultaneously lower the millage rate so that the overall tax receipts are what the city needs. This way, people whose properties have skyrocketed in value relative to the rest of the city would have their taxes go up slightly, those whose values have gone up but gone up by a relatively lower amount would see a reduction in taxes, and the city still gets all its revenue for operations. If everyone's value has doubled (as an example), it would seem better to raise everyone's assessments by 100% and cut the millage rate by 50% than to have some weird half-Prop13 situation where 123 Main St is assessed at half of 125 Main St because 123 last sold in 1984 and 125 sold last week for $1.4MM in cash.
        photojosh 9y ago
        We don't have a land value tax in Australia. But I think we should. > Can’t raise taxable values to be realistic, as a lot of older folk are sitting on fixed income in multi-million dollar homes. In this situation, maybe we should allow retired/older folks to defer taxes until the sale of the property (kind of a government-based reverse mortgage). Would be messy to administer though.
  - Qwertious 9y ago
    >Well yeah, in practice, we can say an asset's value is what the buyer and seller agreed upon for the price, but I'm asking about valuing it while it's being held for taxation purposes Hah, it's kind of zen - if a house isn't being offered for sale, does it really have a selling-price? As a hypothetical, you could mandate that people put a value on their house, and then say "you must accept offers more than Nx that price - so say, if N=2 and you value your house at $1million, then if someone offers $2mil, you automatically sell. Then, charge them tax based on their own evaluation. If they value it way too low for the purposes of tax fraud, then someone will just buy their house for said stupidly-low price and sell it at market-price for a profit. I mean, there are all sorts of social problems with it (that might well sink it), but it seems like a pretty nifty solution to the problem.
    - thedirt0115 9y ago
      Oh man, tell me that wouldn't start a wave of ML startups scouring the tax valuation listings for houses to flip!
- ianai 9y ago
  and composite utility. Ie location, size, amenities, etc. A home near a good school will always have a higher value. Aka hedonic regression and valuation.
wyager 9y ago
Probably the best way to do this that would actually be fair and as accurate as plausible would be to auction some sort of contractual instrument that pays out or charges the bearer depending on the difference between the sale price (whenever the land happens to sell again, if ever) and a predicted price (set by the auction). The land would be taxed at the rate established by the auction, and the instrument would be configured such that manipulating the auction on your own property is economically unfavorable. This would allow people with expertise in accurate land pricing to make (a bit of) money and remove any arbitrary or unfair pricing from a tax assessor.
aidenn0 9y ago
For easily traded assets, it's easy; the owner sets the value and must accept any offers to buy above that value. There are obvious issues doing this with residences though.
- RHSeeger 9y ago
  That ignores sentimental value, though. I wouldn't want to be taxed a huge amount for my father's watch.. but neither would I be interested in selling it for less than a huge amount. It's certainly not worth that huge amount to anyone but my family.
  - aidenn0 9y ago
    That's why I qualified with "easily traded." I have seen people argue for it still working for other forms of property (most notably houses; I don't want to be forced out of my home) with the argument that if people set a value e.g. 2x what the property is worth, that will deter forced selling and then the tax rate can be lowered slightly to be revenue neutral. I'm less convinced.

Who determines the 'real' value of an asset, and how?

wetpaws 9y ago

Market correction does :)

thedirt0115 9y ago
Well yeah, in practice, we can say an asset's value is what the buyer and seller agreed upon for the price, but I'm asking about valuing it while it's being held for taxation purposes. This is easy for stocks, etc, which are homogenous units that have other sales going on all the time, but for a house, for example? Comparisons are hard in practice! No house I've bought/sold has come in at the government's valuation.
- mjevans 9y ago
  In the case of real-estate or other location dependent properties, there's often an assessment process of some sort. As a simple means the government could also act as the 'auction house' for properties and entertain prospective bids on a property. The median of those bids could be used to set the asking price if it's higher than the last public valuation of the property (this is mostly to discourage front companies down-bidding to cheat taxes). For more fungible items the current market valuation seems much more obvious.
  - sokoloff 9y ago
    I've long felt that the appeals process for a real estate tax appraisal should include the owner's option of, "Deal! I'll sell it to you [the city/town/county] for 90% of the value you just appraised it for, subject only to being eligible for a Certificate of Occupancy [which cannot be unreasonably withheld]." Optionally, add a provision that, if the town objects, the owner names a new price for the appraisal that the town can either accept as a valid appraisal or purchase the property for 111% of the owner's figure.
    - nikanj 9y ago
      In Vancouver we have the opposite: realtors call you weekly and promise you 1.4 million cash on the spot, while the tax value is 600k. Can’t raise taxable values to be realistic, as a lot of older folk are sitting on fixed income in multi-million dollar homes.
      - sokoloff 9y ago
        It seems that when prices move in this direction, you could raise the taxable value and simultaneously lower the millage rate so that the overall tax receipts are what the city needs. This way, people whose properties have skyrocketed in value relative to the rest of the city would have their taxes go up slightly, those whose values have gone up but gone up by a relatively lower amount would see a reduction in taxes, and the city still gets all its revenue for operations. If everyone's value has doubled (as an example), it would seem better to raise everyone's assessments by 100% and cut the millage rate by 50% than to have some weird half-Prop13 situation where 123 Main St is assessed at half of 125 Main St because 123 last sold in 1984 and 125 sold last week for $1.4MM in cash.
      - photojosh 9y ago
        We don't have a land value tax in Australia. But I think we should. > Can’t raise taxable values to be realistic, as a lot of older folk are sitting on fixed income in multi-million dollar homes. In this situation, maybe we should allow retired/older folks to defer taxes until the sale of the property (kind of a government-based reverse mortgage). Would be messy to administer though.
- Qwertious 9y ago
  >Well yeah, in practice, we can say an asset's value is what the buyer and seller agreed upon for the price, but I'm asking about valuing it while it's being held for taxation purposes Hah, it's kind of zen - if a house isn't being offered for sale, does it really have a selling-price? As a hypothetical, you could mandate that people put a value on their house, and then say "you must accept offers more than Nx that price - so say, if N=2 and you value your house at $1million, then if someone offers $2mil, you automatically sell. Then, charge them tax based on their own evaluation. If they value it way too low for the purposes of tax fraud, then someone will just buy their house for said stupidly-low price and sell it at market-price for a profit. I mean, there are all sorts of social problems with it (that might well sink it), but it seems like a pretty nifty solution to the problem.
  - thedirt0115 9y ago
    Oh man, tell me that wouldn't start a wave of ML startups scouring the tax valuation listings for houses to flip!
ianai 9y ago
and composite utility. Ie location, size, amenities, etc. A home near a good school will always have a higher value. Aka hedonic regression and valuation.

wyager 9y ago

Probably the best way to do this that would actually be fair and as accurate as plausible would be to auction some sort of contractual instrument that pays out or charges the bearer depending on the difference between the sale price (whenever the land happens to sell again, if ever) and a predicted price (set by the auction). The land would be taxed at the rate established by the auction, and the instrument would be configured such that manipulating the auction on your own property is economically unfavorable. This would allow people with expertise in accurate land pricing to make (a bit of) money and remove any arbitrary or unfair pricing from a tax assessor.

aidenn0 9y ago

For easily traded assets, it's easy; the owner sets the value and must accept any offers to buy above that value. There are obvious issues doing this with residences though.

RHSeeger 9y ago
That ignores sentimental value, though. I wouldn't want to be taxed a huge amount for my father's watch.. but neither would I be interested in selling it for less than a huge amount. It's certainly not worth that huge amount to anyone but my family.
- aidenn0 9y ago
  That's why I qualified with "easily traded." I have seen people argue for it still working for other forms of property (most notably houses; I don't want to be forced out of my home) with the argument that if people set a value e.g. 2x what the property is worth, that will deter forced selling and then the tax rate can be lowered slightly to be revenue neutral. I'm less convinced.