Tax Overpayment Possible in Sheriff Foreclosure Sales

A late change in the rate used to value foreclosed homes could have caused some to overpay in taxes

If you bought a foreclosed home at a sheriff’s sale in Philadelphia last year, you may have paid too much in taxes -- and don't expect anyone to tell you about it.

“The state collected more money than they should have,” says George Kroculick, a real estate attorney with Duane Morris LLP. Kroculick and his colleagues recently outlined how a late change in the way certain properties are valued effected some foreclosure sheriff sales and other transactions in Philadelphia.

The state of Pennsylvania sets a rate for assessing the value of properties -- like foreclosure properties -- that don't have a reliable market value when they're put up for sale.

Called the common level ratio factor, it's typically set on July 1. But last year, it wasn’t put in place until this January – six months late.

The new rate of 3.27 is lower than the rate of 3.97 used to value properties for the year before. Since the realty transfer taxes are determined by this value, buyers overpaid.

“I bet you it happened in most sheriff sales in the city of Philadelphia,” Kroculick said in an interview with

He outlined this example:

A home assessed at $100,000 would have a computed market value of $397,000 -- based on the old factor of 3.97. With the new factor of 3.27, the home’s value would be $327,000. Bringing the tax down from $11,910 to $9,810. That means the buyer overpaid the realty transfer tax by $2,100.

The Pennsylvania State Tax Equalization Board sets the rate. Board clerk Alicia Winey says delay wasn’t on their end.

“The reason the common level ratio went out late is because Philadelphia did not get the real estate sales to us in time,” Alicia Winey said. She says the board set the rates in December after receiving the data from city officials.

The Philadelphia Department of Revenue confirms they did delay getting the information to the State Tax Equalization Board. Revenue Department chief council Frances Beckley says the department has not notified buyers about the potential over payment because there's no obligation.

Kroculick agrees it would be tough to expect the officials to go back and uncover the overpayments.

“It’s a big effort to have the state go through and figure out which ones are which,” he says.

As for getting your money back, it will require some paperwork. 

Most of the tax -- 3-percent -- is paid to the city. The Philadelphia Department of Revenue says you can fill out a refund petition to request a review. The form is available on their website.

If you also paid 1-percent state tax, you need to apply separately for that refund. A spokesperson for the Pennsylvania Department of Revenue says buyers should fill out a realty transfer tax refund application – form REV-1651.

In both cases, you have three years to apply for a refund. Officials will review the transaction and if you overpaid, you'll get a refund.

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