Save Yourself a Little Time and Hassle: Fill Out the Right Forms

 

Each time a property’s ownership changes hands, a small avalanche of documentation must accompany the transaction. Your Realtor will walk you through the process, but it’s still nice to know what’s coming. Here’s some information on a couple forms, forms that will save you time and money if you complete them in a timely and thorough manner.

The first form is the Preliminary Change of Ownership Report (PCOR), a short document that informs the county about the change of ownership. Each time a property is transferred to a new owner, the county reassesses the property’s fair market value in compliance with Proposition 13: the PCOR aids them in this process.

In 1978, Proposition 13 declared that the maximum amount of any ad valorem tax on real property shall not exceed one percent of the full cash value of such property, and that annual increases of the tax would be limited to an inflation factor not to exceed two percent. A reassessment of the property tax can only be made when the property ownership changes or when construction occurs. (California Constitution Article XIII)

Given this information, you can understand why the county is eager to know about ownership changes: it’s one of the few times a big jump in the taxable value of a property happens. There are exceptions to the reassessment rule. For example, if one family member transfers ownership to another family member, the property’s tax base remains unchanged; but typically (if not a family member) a new tax base is established when the property changes hands.

Be aware that fair market value does not necessarily mean purchase price—a common misconception. The county assessor’s office independently researches the value of the property based on other properties in the area and current market conditions. So if you got an incredibly good deal when you purchased the property (or if you overpaid), your purchase price may have little to do with the fair market value assessed by the county.

When you sign the Preliminary Change of Ownership Report, you are certifying the information is correct under penalty of perjury. This is not a time to stretch the truth to try to get out of paying more taxes. Just dutifully complete the information that identifies the property, the seller, the buyer, and the terms of the sale. As with many regulations, if you don’t, the penalties get expensive.

The next form is the Statement of Information (SI), frequently required by your title company. It establishes that you are who you say you are, and prevents you from being confused with someone else. Sounds basic, I know, but you don’t want to be confused with someone of a similar name who has a problematic financial or legal history. This confidential form helps prevent a mistaken identity issue. It asks for information including your full name, social security number, date of birth, driver’s license number, and marital status. It also asks for ten years’ worth of residences and work history.

You may recall that title insurance is different from traditional insurance in that it attempts to protect you and your lender from problems in the past, rather than the future. The SI helps assure that problems that could impede the sale of the property are, in fact, related to the buyer and/or seller involved in this transaction. Clearly, if you have a common name like Smith or Jones, you’re more likely to have issues, but by collecting a detailed history, the SI is often able to prove you were not, for example, the John and Nancy Jones involved in a lawsuit in Los Angles when you’ve been living in Ukiah your whole lives.

So although these forms are mundane, take the time to complete them properly. You’ll be glad you did.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.