Overtaxed Homeowners Fighting Back

Here's a piece from MSNBC that talks about people appealing their real estate taxes because they are too high compared to current home valuations. The details:

Now that the housing bubble has burst, up to 60 percent of the nation's taxable property may be overassessed, meaning owners are paying thousands of dollars more in taxes than they need to, experts say.

That is leading to a flood of appeals in many markets from homeowners eager to cut their taxes and speed the process of aligning tax valuations with reality.

While home prices have fallen by 30 percent on average since their 2007 peak, according to the Case-Shiller Home Price Index, many counties only reassess every three to five years and have little incentive to move faster considering how important property taxes are to funding local government operations.

So homeowners are increasingly appealing the valuations, although the number is still a tiny fraction of the total — 2 to 4 percent, according to the National Taxpayers Union.

“People forget they need to appeal,” said Barbara Payne, executive director of the Fulton County Taxpayers Foundation in Georgia. “Everyone should have appealed more than once in the last five years or you’re paying too much.”

Those who appeal are getting mixed results. Only 20 to 40 percent of those who challenge their assessment walk away with a victory, the NTU said.

You may remember last year when I tried to get my assessment lowered. I did get it reduced, but not by much. This year when I got my assessment notice it was much more realistic -- down 14.2% -- and at a level I feel is a true reflection of the value of our home. Now I just have to see what this does to the actual amount of taxes we pay.

One big downside to this: since the township is reflecting actual values for homes, I assume tax revenues are down big-time. As such, they're now asking voters to approve an additional millage to pay for needed police and fire workers. I guess if they can't get it one way, they'll get it another. But if my taxes aren't going to pay for the proper level of police and fire protection, what are they going towards?

Any of you seen changes in your real estate assessments?

Comments

[Lakita]

As someone that is currently home shopping, these taxes are outrageous! I have walked away from some nice homes with extremely high taxes. Sure there is a possibility of getting them lowered, but as you pointed out, they chances of it working in your favor is low.

Also, I don't want to risk being "stuck" with high taxes. That is a gamble I am not willing to take.

[Jeffinwesternwa]

Assessments ARE down but, actual taxes ($$) due are UP..Governments of ALL types NEVER REDUCE taxes witout a taxpayer revolt and subsequent legislation that will follow. Time for national, state, local governemnt CITIZENS - not the bureaucrats - to decide to really tighten the belt and everyone to realize the sacrifice. "nibbling around the budget edges" won't solve the national, state, local budget problems. Only MASSIVE cuts along with accurate revenue predictions will work! Bring back "zero based budgeting" and REAL "Pay - Go" legislation!

[MC]

My county taxes homesteads based on their assessed value *2 years ago*.

So even though everyone's homes have lost 30% in the bubble, we are still being taxed as if they haven't. And if you call up and complain, they just cite the "2 years ago" rule and say they can't go back in time and reassess. Fiendish!

I am thinking I should ask for a reassessment of my house valuation every single year in self defense?

I also note that they also raised property taxes again this year--you can't win!

Even though instead of resurfacing the street in front of my house they just put down oil and gravel.

And even though my kids' elementary school sent notes to parents to dress their kids warmly because they were only heating the school building to 58oF in the winter.

[Budgeting in the Fun Stuff]

MC, does that mean that your house will be valued lower in 2011 for 2009 and even lower in 2012 for 2010? I'd push back with that kind of logic since they're nuts. That stinks if they just use it to their advantage.

Our assessment in 2009 automatically dropped our value by $15,000 since we live in a high foreclosure area. This year's assessment was identitical, so yay!

We only paid $2200 in property taxes total last year for school, county, and PUD...usually it's around $3000.

I'm glad we don't need to move though...our house could have sold for $150,000 3 years ago but would only be on the market for $135,000 right now.

[Apex]

@Budgeting,

That is exactly right.

I don't know where MC lives but I live in MN and thats how it works here.

For example. In Jan 2010 we get the 2010 valuation of our property. This will be used to set the taxes for 2011. This assessment is based on sales from Oct 1 2008 - Sept 30 2009.

We pay taxes in May and Oct of the tax year. So for the Oct 2011 tax payment it could be based on sales from Oct of 2008.

No one likes it but its fair. It's always been that way and no one complained about it for the last 20 years while our valuations were 2 years below the rapidly increasing values. People are happy to take a gift for 20 years and then when the tables turn they scream injustice. Everyone is being treated the same and so I don't see why its a problem.

In addition the county needs what it needs to pay its bills. If everyone's values go down, they will just raise everyone's rate. Many times as everyones values went up here in MN the total tax didn't go up at all or not by nearly as much as the values went up. No one complained about that either.

Trust me, I hate taxes, and I especially hate property taxes. As a real estate investor I get hit with this many times over since I own many units, so if anyone should be upset about it one could argue it would be me. But the issue of old valuations does not seem like an issue to me given that it is entirely consistent with how it has always been done. Atleast here in MN it is.

[Budgeting in the Fun Stuff]

Apex, I'd prefer that system since I'd know in general what to expect. It's like having 2 years warning time on what you'll need to save if you don't escrow (like us).

As it stands in Houston, you pretty much just save like you did the year before until your assessments arrive in March or April...then you either scurry to catch up or have extra money laying around to put elsewhere. In our case, I was saving like I did in 2007, so our property tax account is only $600 away from where it needs to be total and it's only April...it's a nice problem to have.

[Jeff_in_MN]

I bought a foreclosure last August, In MN taxes are based on home values about a year and half old. I paid $217K for a home that had a tax value of $450K, I provided my county assessor a whole host of market data for comparable homes that sold in the same time period.

I just received my tax valuation for 2011, the assessor dropped my tax value to $272K (39% Reduction). The average tax value in my neighborhood only dropped 8%. The important message is that it is great if they drop you tax value, but if everyone’s tax value is reduced the same you will still end up paying the same amount of taxes. Appeal, provide as much data as you can (MLS sites and County Website are great), and be persistent but not annoying.

[Apex]

MN also has a law that no one's taxes can go up more than 12% in any given year.

So if your assessment changes drastically, the assessment stands but the change in taxes can only be +12% per year until it catches up.

So if your taxes were 3000 one year it could not be any more than 3360 the next year. So you should not get caught with a drastic change in taxes here.

[Apex]

@Jeff,

I am with you man. I wish it were possible. Unfortunately I see higher taxes in all our futures. I suspect some kind of national sales tax or VAT will be added to our system in the next 10-20 years and it will be in addition to the income tax, not in place of it.

[Robert W]

Growing up in the North End of Boston , I learned certain things are written in cement - death, change, taxes and paying the family.
Complain about the ones you can't control and deal with the others.
In past 2 years we have contested our property taxes, we have had them adjusted
downward some 30% to real value. Luckly we refi'd before the down ward spiral,
so now we're really just renting from the bank.

[CPA Abroad]

I contested my 53% property tax increase. When I went before the appeal board I admitted I got a great deal on my place (in 2005) and my taxes should go up, but not 53%. I had a condo so I took the county auditor info on the other 20 units in my complex and averaged by # of bedrooms and baths and some other things. Based on my assessments, one of the the board members literally took up my fight for me and I barely spoke. I was paying about 0.25 more per square foot than any other person in the place. The "drive by" assessment I received was way out of line. I still ended up with a 25% increase, which was in line with my suggestion, but it reflected what I believed was my true market value.

I think 3 things helped me in my appeal. One, I did not try and low-ball them with an assessment not in line with similar condos in my complex. Second, I made sure to avoid an accusatory language or try to place blame on anyone even though the assessment was at best egregious. Finally, I wore a suit to the appeal, which matched what the Appeals Board was wearing. Some people were there in shorts and t-shirts. I can't say conclusively that it mattered, but I feel like they respected me more for considering this a serious matter and showing respect for the job they were doing.

[KH]

Yeah, I'm in MN. Yeah, the 2008 assessments should result in a tax savings----if, and only if, the assessments are fair.

But in my experience (I contested several times already), the tax assessors' judged my house to be worth $20K more than other independent assessors (for example, the assessor that my bank used when I refinanced came up with a lower amount).

I think the 2 yr delay is an insane system, apparently designed primarily to boost tax revenue. In no way is it "fair". If you need a delay to plan for your taxes, you should create an escrow. Fair would be taxing my house based on a real time assessment using independent assessors.

[Apex]

@KH,

Just curious as to why you think the 2yr delay is not fair and why you think it boosts tax revenue.

For the past 50 years house values have stayed the same or increased pretty much every year except the last 3. So during that whole time being 2 years behind meant a lower valuation. Perhaps I am missing something but how do you believe the counties used this 2 year old lower valuation to raise their revenue over the previous 47 years prior to the last 3?

Given that everyone gets treated exactly the same and I don't see how it raises taxes to have old (typically lower valuations) why has it been unfair?

You may have good reasons why it is. I can't see how it is but am certainly open to hearing how I am wrong.

[Apex]

@Jeff_in_MN,

That's very good advice.

I have been working to get the taxes for 2010 based on 2009 valuations of 2008 sales to get lowered on forclosures that I purchased as well. I tried last September and they turned me down. I then got my current valuations and the values are down 45%. So then I went back to them and told them I didn't see how it was possible that the values dropped 5% last year and 45% this year. I argued that since there were no comparable sales in the neighborhood for the previous 5% drop that they likely didn't do a competitive analysis but likely just took a county wide average and applied it to my units which were dropping much faster. They agreed to do a comparative analysis, which I am pretty sure they didn't previously do.

I just got a call a few days ago that they need to get into a couple of the units that they haven't been in because they are not allowed to do an abatement without an inspection. I of course asked if that meant an abatement was coming and she said, yes, it looks like there will be a reduction. I don't know what it will be but it looks like it eventually paid off. I hope they get moving on it though because tax abatements have to be completed by April 30th of the tax year in question or they are not valid.

However that reduction will be based on sales from Oct 1, 2007 - Sept 30, 2008. So the value will still be much higher than it is now but it will be lower than they currently have it and it doesn't matter to me. I will just have guaranteed lower values for the next couple years now regardless of the price recovery in the particular units I bought. It seems to be a wash to me.

[MC]

Apex,

I'd rather pay my taxes based on a current year evaluation of the value of my home. I think that's fair.

Because the current year is the year I lived in that neighborhood, with those sidewalks/sewers, with that particular fire and police coverage, and with my children accessing that particular school building. Not only housing prices but also services vary from year to year. The services/schools/roads/maintenance provided by my taxes directly affects the assessed price of my home.

My neighborhood elementary school turned down it's heat this year, but not last year. The school building is older and more run down than it was a few years ago. So the current lack of services make my neighborhood school less desirable for people looking to relocate. Why should I have to pay taxes based on how the place was maintained 2 years ago?

The streets in my neighborhood were in better shape 2 years ago--the city hasn't been able to afford to fix them recently so they are full of potholes. Also, what about people who move in and out of the area?

I don't see why it's "fairer" to pay based on past evaluations. Instead, I see the "reach into the past" as a way for the county to avoid the consequences when people demand they reassess.

[Apex]

@MC,

Those are valid points.

However unless your property went down by way more than other properties in your taxing district the effect will be the same for everyone anyway.

You aren't really paying taxes based on the budget from 2 years ago just because the home valuation is from 2 years ago.

You are paying taxes based on the current year budget and your percent of that is based on your home valuation from 2 years ago. So if everyone's house is down 20% but everyone's value still shows it 20% too high, its a wash. If your house is down 30% and everyone else's is down 20% then yes, you are paying 10% more than you should have to. That will catch up 2 years hence. So yes, you could get a little bit of the short end of the stick in that situation.

It's a short cut the county uses so they don't have to try to figure out the current changing value up to the current minute or even current year. I understand your point but I think most people think it would drastically change their tax bill. The truth is if they did spend all the time and effort to re-evaluate everyone's house and lower all the valuations and recalculate the tax burden then everyone would see a valuation that reflects current prices and a tax bill that looks very close to the one they would have had on the old values because the county, city, and school district still has to meet its budget. Unless you are suggesting the county, city, and school district all just cut their budget by 20%. If they did that a few unfixed potholes and lower heat in the schools would be a drop in the bucket compared to what they would need to do.

I really think its an easy way for people to think they are getting shafted but the effective change by getting current valuations wouldn't really change the overall picture.

Thats why I don't see it as the real issue. The real issue is all levels of govt spend way too much money. If I believed we had any real chance to change that I would focus my effort there. But I don't. So my effort is focused on finding every way possible to live within the current system and pay as little as possible. Having rentals properties helps me in that sense as I get to depreciate away most of the profits for the time being.