Q: I moved to the Chicago area last summer from North Carolina and decided to rent a house until I figured out where I wanted to buy and got over the sticker shock: It’s a lot more expensive to rent in Chicago than in North Carolina.

But, here’s where I’m confused. When I looked up property values given by the Cook County Assessor’s office, houses offered for sale at $500,000 have a value of under $200,000 at the County’s office. Are offering values that inflated around here, or are the county assessment worthless?

Also, I’m puzzled at the significant differences in property taxes on what seem to be comparable properties in the same town.

A: Welcome to the wonderful world of real estate taxation. You have discovered one of the most confusing issues for homeowners nationwide.

In some parts of the country, the recent selling price for a home will set the assessment or value of the home for real estate taxes. Furthermore, in some parts of the country the value of the home may increase by a large amount but the assessor’s value of the home will stay the same until the home is sold.

In the Chicago area and in some other parts of the country, the assessment of a home may be determined by a complicated equation as to the location of the home, the type of home in question, the home’s construction (brick or wood), the home’s lot size and age, the number of bedrooms in the home, and whether the home’s basement or attic is finished.

When you have an assessment process that uses factors other than the purchase price for a home, you may see strange results. While in practice homes in the same area that are about the same size should have the same assessment, they may not. In fact, their assessment could be thousands of dollars apart.

In these communities, it will be nearly impossible to figure out how an assessment was obtained for a home. In Chicago, this is particularly tough to figure since the market value accounts for typically not more than half the assessed value of a home.

Finally, when you look at different communities, taxes for similarly-priced homes listed by real estate agents may differ greatly. The difference, in part, may be as a result of how the tax collector determines the burden of taxes for homeowners.

In some cases, a community that has a large and profitable retail base or business base may pay a larger share of the taxes for the community. Homeowners benefit when retailers and businesses pay a larger share of the tax burden. Accordingly, if the community you are looking to buy a home in has almost no retail or business base, the taxes will be higher in that community for homeowners.

As for the difference between home values in North Carolina and the Chicago area, it is huge. But when you consider what you can buy in Chicago when you compare housing prices to the New York City area, San Francisco Bay area or Hawaii, Chicago housing prices might seem like a bargain.

April 23, 2004.