She Lost Her Home by Being Taxed on Unrealized Capital Gains
Lori was a nice young lady. She met Tim & they got married. They inherited a house in 1998. They decided to take out a mortgage. They might have done this to fix up the house that had some issues or for other reasons. I could not get that information. What I do know is that for years they worked & paid down on the mortgage. Finally, in 2013 the mortgage was paid off. They owned their home without fear of someone taking it. Or did they? That year the county auditor appraised they homes value at $39,100.
Tim had some health problems & went into a nursing home. He had always taken care of the bills. His wife still counted on him to handle these types of things. She did not pay attention to the property tax bills. These are liens on their property. When the sewer bill did not get paid, another lien was placed on the home. Some payments were made, others were missed.
Normally when the value of your house increases, it is a good thing. But, when you really look at the situation, you can see that your equity is just a number on paper unless you sell it. You could refinance and pull money out of your equity, but is that really possible if you are living on a low fixed income after you retire?
Too many people count on things staying the same. They plan for retirement, thinking that they have a certain amount in a pension or Social Security. They may have a little in a 401K or savings to supplement the retirement income. They plan for gas and insurance. They know they have to buy food & clothing.
Then, thanks to their government spending more than it has, the government prints more currency to cover its shortfalls. This causes the prices of groceries to go up. Clothing is also more expensive, as is gas & everything else. But, the income from their pension doesn’t change. If Social Security increases, it is never as much as the cost of the things you need.
To make matters worse, the value of your home, as appraised by a government employee, increases. This is an unrealized gain. This happens to all of us. Far too many can barely pay the bills as it is, so they know they can’t get another mortgage and make that payment also. At first, we may feel good that the house we bought years ago is now worth twice as much. Then, we get a bill from our insurance company. Since the house is worth more, your insurance costs more. Some people take the risk & let their insurance lapse. That saves a few hundred dollars a year. Not a lot, but every little bit helps.
You may see a leak in the garage roof like Tim & Lori did. There was no money to fix it so it just got worse. Eventually that leak rotted away the sheeting & there was a 2-foot hole in the garage roof. You may justify that we really don’t use the garage any more. It is not attached to the house & at least the house is not leaking. Besides, it is difficult to walk all the way back to the garage. It is much easier to just park right by the side door.
Things were much harder with her husband in the nursing home & not there to help her. Lori also started having some health problems. They did what they could, but when the value of their house was raised by 50% in 2024 they had no chance of keeping up.
The property value had more than doubled in a 7-year period going from $40,600 in 2017 to $92,400 in 2024. That is about 11% increase compounded every year, while her income is fixed. She is likely to live another 7 years. What if it doubled again? How many people who have retired thinking they have “Enough” saved for retirement could afford their property taxes going up four times? Imagine retiring at 62 & at 76 you are paying 4 times as much to live in a home you had already paid off. The mortgage you took out to buy or fix it up many years ago was paid in full and now you had to pay more in property taxes than you paid for the mortgage when you bought the house.
Your mortgage was paid off & you could still lose your home to the government for property taxes. The government that receives the tax dollars is the same one who decides what your home is worth. The school system that gets about 2/3rds of the money can file a complaint to raise the value of your property. They have done that to me. The board you dispute these raises to is the same government that raised the amounts to begin with & the same one that gets the money from the raises. These are not elected judges. They are not judges of any kind. In some states, they have no authority to lower the value of your property, even if you just purchased the property a few months prior, in an arms-length sale, for about 15% LESS than the appraised value. Yes, that happened to me in Tennessee. They valued the property at 15% MORE than I had just paid a couple months before & said there was nothing I could do about it. They had determined that ALL of the properties in that county had increased by 45% that year. That raises the question of “Why do they even have these boards?”
In the end, Tim & Lori either didn’t know you could dispute your taxes or just didn’t try. The taxes piled up & then the county took their home and sold it at auction, at the courthouse, for less than half of the appraised value. In fact, it sold for about the same value it was appraised at before they started raising valuations & taxes in 2017. Perhaps if the value had been locked in at what they paid for the house they could have kept up. Instead they were taxed on unrealized capital gains. Gains that were never realized & probably never really existed… except in the tax collectors mind & on their books.
When a buyer, me, went to the auction for all of the properties with back taxes, I had no idea of the circumstances of any of the property or their occupants. I just knew that If I paid the minimum bid the county would get the back taxes. After the judge approved the sale the county told me that they didn’t know if anyone was in the house & if there were occupants, I would just have to evict them. Now, the county got their money & they make the people who paid it out to be the “Bad Guys” when we have to remove the occupants.
These are not just random squatters. These are people who owned their homes. They paid their mortgages. They may have had a mortgage burning party when it was paid off. And then, after they retired, the county arbitrarily raised the value of their homes & doubled the taxes on their unrealized (and possibly non-existent) gains. The county then foreclosed on their home, sold it at auction, & then made the buyer evict them.
When I talked to Lori, I tried to explain what had happened to her and her house. She kept saying “I have nowhere to go.” “I don’t know what to do.” “My husband took care of that.” Her only hope was to talk to the Salvation Army. She said “maybe they can help.”
While we are doing everything we can to make her transition easier, there is very little we can help with when she only gets $900 a month in Social Security. The only silver lining is that I paid $15,000 more than she owed so we are attempting to make sure she gets that money. It may go to Medicare because of her husband being in the nursing home. We are not sure yet. We are also offering a small efficiency apartment that she may be able to handle, both physically and financially. Whether she accepts it or not, it is not “Her” 3-bedroom home that her husband & her lived in, raised a child in & paid off over 10 years ago.
That is why I am supporting ReformPropertyTax.com Help us, and all of the others who are being pushed over the limit by property taxes. If you are a voter, registered in Ohio, click on the link above to find out where you can sign the petition to Abolish All Property Taxes. The complete, clean & simple text of the constitutional amendment is in the paragraph below.
Eric M. Wohlwend
#1 Best-Selling author of Family Success Triangle
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FULL TEXT OF THE PROPOSED AMENDMENT
Be it Resolved by the People of the State of Ohio that the Constitution of Ohio is hereby amended to add Section 14 to Article XII to read as follows:
Section 14. Abolishment of Taxes on Real Property.
(A) No real property shall be taxed, and no law shall impose any taxes on real property.
(B) No other provision of the Constitution shall impose any taxes on real property.
(C) As used in this Section, “real property” includes land. all growing crops. all buildings, all structures, and all improvements permanently attached to land.
This Amendment shall take effect on the first day of the year after it passes.
