By Thomas Harding

It appears that some in the state government are beginning to recognize that there is a foreclosure crisis in the Eastern Panhandle, but there are many who continue to keep their head in the sand and are committed to doing little or nothing about the massive devaluation of home values in the area.

During a visit to Martinsburg on 8 September, The Observer asked Governor Joe Manchin about the foreclosure crisis in the Eastern Panhandle, and specifically, why the county assessors were not including foreclosures in their appraisals. The Governor said he would look into it.

A few days later, Larry Puccio, the Governor’s chief of staff, met with the director of the State Tax Department, Jeff Amburgey, and others to discuss the issue.

On September 16, Kimberly Osborne, communication director for the West Virginia Tax Department, sent this statement to The Observer:

“The West Virginia State Tax Department’s Property Tax Division has spoken with the Berkeley and Jefferson County Assessors. The Assessors inform us that foreclosures and foreclosure related sales have decreased values in both counties and that will be reflected in the 2010 assessments.

Consistent with the I.A.A.O.’s Guide to Foreclosure-Related Sales and Verification Procedures, the Tax Department has instructed assessors that a foreclosure related sale may be considered in the valuation process if the sale meets the market value test, i.e., the sale is pursuant to an arm’s length transaction and is not due to ‘undue stimulus.’ ”  [emphasis added]

Sounds like progress. But in fact, the state is still, as one of the Kanawha County appraisers calls it, wishy-washy on the issue.

According to Angie Banks, Jefferson County Assessor, she did get a call from the head of the West Virginia Tax Department last week, but he did NOT give her any new instructions on foreclosures.

“They have not said whether to include short sales or foreclosures yet,” said Banks. “We got a letter back in March but it was very vague saying we could perhaps include foreclosures that had been on the market for more than six months. Maybe after I have sent in our reports on foreclosures we will know more.”

Despite the lack of guidance from Charleston, Banks said that her department has decided to include short sales – delinquent properties not yet owned by the bank – in their list of valid transactions. She said that they were also compiling lists of foreclosure sales – properties owned by lenders – to compare with normal sales. Banks added that she would be asking an expert from the state tax office to look at the situation in Jefferson County so that Charleston would understand more about the foreclosure crisis.

The Berkeley County assessor, Patsy Kilmer, also received a phone call from the state tax department last week. But contrary to the statement from Kimberly Osborne of the West Virginia Tax Department, Kilmer said that she told Amburgey that assessments in the Eastern Panhandle would come down next year because of regular sales, NOT because of foreclosures.

“It has nothing to do with foreclosures,” Kilmer said. When asked about any new policy from the tax department regarding foreclosures, she said “I have not received anything about including foreclosures in our assessments, no instructions at all.”

Kilmer added that unlike Jefferson County, she was not including short sales in the Berkeley County list of valid sales.

Part of the confusion results from the state tax department failing to recognize the degree of the foreclosure crisis in the Eastern Panhandle. According to state tax department’s figures, only 15% of sales in Jefferson County and 17% of sales in Berkeley County, were foreclosures in 2008. However, these figures do not include short sales, which dominate the market in the Eastern Panhandle, nor do they include sales from 2009, when short sales and foreclosures spiked in the area.

A more accurate and recent picture can be gained from the multiple list service (MLS) – the database of residential sales that is used by local realtors and through which almost all sales are transacted. According to the MLS, short sales and foreclosures made up as much as 50% of all sales in the first six months of 2009.

For example, in September 2009, there were 48 residential homes that sold in Jefferson County. Of these 16 were foreclosures and 12 were short sales. In other words, last month 58% of the sales in the county were foreclosures or short sales.

Through ambiguous communication, fudged statistics and murky policy, the state tax department is effectively telling the county assessors to ignore over half of the local sales, and as a result, homes are being over-valued, and residents of Jefferson and Berkeley County are unlikely to see their tax bills decrease as much as they should in 2010.

It’s not hard to imagine why the residents of the Eastern Panhandle feel that the folks down in Charleston aren’t listening very hard.

Where’s your pitch fork?