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November 13, 2007


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I was waiting to challenge my property taxes and then I realized they assessed the value of my house at 25k less than what I bought it for a year ago. I then decided to not draw any attention.

I helped my brother appeal his property taxes. It worked and was very easy. Just make sure to schedule your appeal time during the open window, if you miss it there is not a "make-up". Also, just be sure to bring some sort of evidence supporting your argument. My brother and I brought examples of similar houses that sold in his area for far less than his house had been assessed. You can get these in the newspaper, on the internet, or in your case you could ask your agent to pull these for you.

It took about five minutes to plead our case in front of the board. They don't make a decision on the spot, the send a letter a few weeks later. My brother had his assessed value reduced by 20%, so it saved him a ton of money. There really is no downside to appealing, unless you feel your house is under-assessed, in which case you should NOT appeal, LOL.

I successfully challenged mine a few years back because they actually did screw up. On my initial challenge (which required no evidence, just a letter), they claimed the value was in line with area sales, yadda yadda. But my house is exactly the same as every other house on the block, yet was valued almost $30k more! After reviewing the records for my neighbors' houses, I found that the county had accidentally overvalued the land portion of the assessment on my house one year, rather than applying the increase to the structure portion. Well, they discovered their mistake and politely added that $30k increase to the structure and "forgot" to take it off the land portion! With my lot size the same as all my neighbors', I was easily able to assemble the evidence for the challenge and they dropped my assessment by the appropriate amount.
If I hadn't been so significantly different from my neighbors, I'm sure my challenge would have been unsuccessful, but in this case, I won.

Did they reimburse you for the overpayment Brian?

I am not sure if this is accurate for all states, but from my experience in all the states I know of suggests otherwise. Property taxes are archaic and backwards. Here is a rundown of how it works:

- The Government (schools, local government, etc) determines how much money it is going to need via its budgeting process. For a particular county, let's assume $1 Billion.

- The assessors assess all of the properties in that county, and the total assessed value of all properties is $25 Billion.

- The treasurer takes the required funds, and distributes them across each property according to their percentage of the total assessed value of all properties. Since they require $1 Billion, and the total assessed value of all properties is $25 Billion, then the "rate" is 4%.

- You receive a tax bill for 4% of the value of your home, based on the assessment.

So, let's assume that property values drop, on average, by 10%. Do you really think your taxes are going to go down? Nope. Now, instead of dividing $1 Billion by $25 Billion, you divide $1 Billion by $22.5 Billion. Now, instead of paying a 4% rate, you are billed the same dollar amount, but it is at a rate of 4.44%.

The "rate" that you receive is only sent to you after everything is said and done. Like I said, property taxes are archaic and backwards.

Also, please remember that I am not implying this is how property taxes work everywhere. In the state I reside, we are looking a constitutional amendment that will limit residential property tax to 1% of the assessed value of a home. So, what does this mean? It will be a change in the way our taxes are done, but we could be forced to have artificially higher assessments.

My wife is a property tax assessor for our county, as well as a licensed appraiser at the state level. In our state, residences are reassessed every 3 years. The process is known as a "mass appraisal" because it has to be done at the neighborhood level (note that several "subdivisions" can make up a neighborhood. Quality of construction, square footage, land, and additions are some of the factors taken into account.

I don't recall the exact numbers, but in these mass appraisals, the goal (and state law) is that something like 90% of the homes should be within 10% of their "market value", that is, the price that the market would support if the property were sold in an arms-length transaction. In a year where market values are down over a three year span, the valuations of those homes being reassessed will be down. In a year where the market values are up over a three year span, the assessments will go up.

Also, due to the "average" nature of the mass appraisal, the chances of a property being undervalued are about the same as a property being overvalued. Of course, you don't hear of many people appealing their undervaluation. ;-)

While beastlike is correct about the budget being arrived at before tax rates are set, the assumption that the dollar amount of your taxes remains the same only applies if *everyone* in the county appealed their valuation when home values in the area drop.

The law is a bit tricky on this point -- Any property owner is required to file a "return" (think income tax return) each year during a certain window. This return simply allows you to state what you believe the property to be worth. The county can either accept your value or reject it. If they reject it, you have the right to appeal. If you do not file a return, the county's previous assessment becomes your automatic return. In essence, by failing to file a return, you are saying that you agree with the previously assessed value.

However, those homes that are up for their three year reassessment will be assigned a new value, and the property owners notified of the new assessment. These owners (one-third of the county each year) have the right to appeal their reassessment.

If you (a) did not file a return or (b) were not reassessed, then you have NO rights to appeal. This is the important part, at least in our state, and I would assume many others. If you believe the value of your home has dropped since your last assessment (or you believe a previous assessment was overvalued), FILE A RETURN. Otherwise you are stuck.

Mistakes made in square footage, additions, land, etc. are pretty much always corrected IF the process above is followed. If you come to an assessor after the windows have passed, their hands are pretty much tied. The values have been passed on to the county board at that point, and the budget will be set based on those values. The assessors cannot modify them after that point unless you filed a return (with a different value) or were reassessed in that year.

If you filed a return or were reassessed, and believe that you could not sell your property for the amount that you are assessed for, then you need to support that with reasonable comparisons of nearby, equivalent, arms-length transactions for the time period being appealed. For every appeal, my wife will research nearby transactions and see if they support the property owner's numbers. If they do, then she will go ahead and modify the assessment accordingly. It's understood that some percentage of the properties will be overvalued due to the nature of mass appraisals, and it's her responsibility to change these when they are brought to her attention.

Do NOT bring comparisons that are unrelated to your property--A father selling to a son, a foreclosed home, homes too far away from yours, vastly different square footages, vastly different acreages, etc. You are looking for comparisons that are "similar" to yours.

You can always sit down with the assessor and ask them for their comparisons. If you disagree with their comparisons, then you can appeal to the next step, in our state the Board of Equalization for the county. I would guess that your chances here depend on the quality of the assessor. If they know what they are doing, it's going to be hard for you to come up with better comparisons that convince the board that your valuation is better. For instance, my wife's valuations have been accepted over the property owner every single time in the last two years of appeals (about 40-50). Of course, she's also one of the few county assessors who is also a licensed appraiser.

If you lose before the Board of Equalization, you still have another option--you can appeal to the Superior Court. At this point there is a filing fee ($80?). My understanding is that the county attorneys do tend to settle a lot rather than go to court.

All said, it's going to take a lot of time and effort to argue an assessment that's close to the real value. If there are obvious mistakes, then you should absolutely appeal to have them corrected (make sure you file a return in order to do so). If you believe there is no way that you could sell the property for what the county's assessed value, then take that case to the assessor -- Chances are good that they will make the modifications if your numbers are reasonable. This is going to be the most likely course of action in this "down" market that we are currently seeing in most areas.

Regardless of what state you are in, now is probably the time to educate yourself on the process you need to follow next year to make sure your value is correct.

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