Private home sales in nondisclosure states across the U.S. can allow owners to benefit from lower property tax bills. Meanwhile, neighbors may see higher ones. This happens because sale prices are withheld from public records.
Key Information Missing
Home sales typically provide data for assessing property values and determining tax bills. In nondisclosure states, this data remains hidden. Sellers’ privacy takes priority, leading to a lack of transparency and fairness. Those with undisclosed information may use it to reduce their own tax bills.
Transparency and Assessment Issues
Assaf Harpaz, Assistant Professor at the University of Georgia School of Law, notes that property taxes depend on assessed value. Different methods and data points determine this value. Off-market sales create transparency issues affecting assessments. Fewer data points are available to inform assessors and buyers.
Legal Status and Regulation
Private listings are legal nationwide and regulated by the National Association of Realtors (NAR). After a sale, deeds and transfer taxes are usually public records. Yet, in about 12 nondisclosure states, prices remain confidential.
“Institutional, sophisticated, and wealthy actors may have more ability to use private information—like closing statements—to protest an assessment.” — Assaf Harpaz
Assessors Face Difficulties
Real estate researcher Sergio Garate from Emory University studies private listings. In nondisclosure states, assessors rely on alternative sources—prior assessments, comparable sales, property characteristics, and listing prices. When key information is missing, valuation errors increase.
This knowledge imbalance favors some owners, leading to lower assessments. Garate’s research highlights how nondisclosure states face challenges due to limited transaction data.
Consequences in Disclosure Practices
Nondisclosure affects appraisal and mortgage performance. Garate and colleagues found stronger appraisal bias and higher mortgage default rates among financially constrained borrowers in these states.
Information asymmetries influence transaction volume and bargaining power among brokers and parties involved.
Case Study: New Mexico
New Mexico’s shift from nondisclosure to partial disclosure in 2004 increased annual tax revenue by 4 percent, equating to $1.09 million. This indicates that nondisclosure lowered expected property tax revenues.
If some properties are undervalued, others may bear a larger tax burden. Nondisclosure states illustrate the shift in tax burdens due to unavailable sale information.
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