Of all the taxes you pay, probably none delivers more tangible benefits than the property tax you send to your city, town, or county. Real estate taxes are the lifeblood of local governments, accounting for some three quarters of their budgets for schools, sanitation, parks, and public safety--in short, for just about everything that makes the quality of life in your community what it is. But even if you're satisfied with what your property-tax dollar buys, you should not have to pay more than your fair share.
Your local tax office computes your annual property-tax bill by multiplying the local tax rate by the assessor's estimate of what your home and the lot it sits on are worth. The rate is set by your community's elected officials and applies equally to everyone. However, if you pay substantially more than your neighbors do or if your locality hasn't had a general property revaluation in several years, your tax assessment may be too high.
What do the records show?
The most basic errors arise from a simple mis-description of your property in the municipal records, and this is where you should look first if you suspect a problem. The listing should specify the lot size, type of construction, number of rooms, and so forth.
Overworked assessors usually cannot inspect every property they are required to value. Often they rely on casual "drive by" assessments, leading to mistakes in the property records--an extra bedroom here, a bath there, a garage instead of a carport. The assessor may also have missed defects such as a cracked foundation, a leaky roof, or pest infestation that could significantly reduce a home's value. Undesirable environmental conditions, such as unusually heavy local traffic from a nearby freeway, can also lower a property's value and may be grounds for a tax reduction.
Assessing the assessment
Most municipalities try to peg the assessed values of properties in their jurisdictions to the actual market values. However, unless the properties are re-appraised often--something few communities do--the valuations tend to drift apart.
Some states try to bridge the difference during periods between full-scale reevaluations by applying a so-called "assessment ratio." In one New Jersey city, for example, a home carried on the tax rolls as having a market value of $100,000 would be taxed as if it were worth $106,952, after its ratio- currently 93.5 percent--is applied. A homeowner who thinks this figure overstates the market value can challenge it, although in the Garden State, unless an assessment exceeds the estimated market value by more than 15 percent, the assessor's computation will prevail.
Many owners may be lulled by an apparently low valuation into thinking that their tax bite is lighter than it truly is. That's because some states tax properties on just a portion of their assessed value, as little as 10 percent in Louisiana. A fractional valuation, however, can mask a high assessment. For example, if you live in a $100,000 condo located in a state with a 25 percent valuation and your property is misassessed at $30,000, your tax would be equal to that of a neighbor living in a home worth 20 percent more.
Making your case
There are several ways to document a claim that your assessment is too high. The easiest is to point out obvious discrepancies between the description of your home in the official tax records and its actual condition. Often the assessor's office will adjust your record on the basis of a single meeting if you can produce compelling evidence that the assessment is incorrect. You can also buttress your claim by tracking recent sales of three to five homes that are similar to yours and located nearby. A local Realtor, Consumer Reports Home Price Service, or even the assessor's own records can help identify these comparable properties. If the potential savings warrant the expense, you may wish to hire an appraiser who is certified or licensed by your state to prepare a customized valuation of your home. Expect to pay between $400 and $500 for this service.
A formal appeal usually requires a hearing before the local appraisal review board. Typically, you'll have to pay all taxes due while your appeal is pending, though some municipalities will give a refund if you win your claim. Daunting as it sounds, most homeowners can manage an appeal by themselves. If you don't want to go it alone, a local real estate agent may be able to refer you to a property-tax consultant or an experienced attorney.
If too many owners challenge their tax bills successfully, of course, a local government would have to ratchet up the tax rate to provide the services residents say they want. But that's a fair way to meet the community's needs and one that lets the citizens determine what good government truly costs.
STEP 1: EDUCATE YOURSELF
When it comes to property taxes, timing is everything. First, call the assessor's office to find out the two crucial tax dates for your community. The first is called assessment or valuation day. It's when the information the assessor has on your home becomes the basis for assessing its value. The second is called the tentative roll date. This is when the town tentatively sets the actual tax amount individual homeowners will pay.
Start working on your appeal between those two dates. Most states require that you be notified after the tentative role is set if there is a change in the market value, assessed value or tax rate of your home. Although the notice includes a deadline for filing an appeal, often the date doesn't leave enough time to gather and submit the information, forms and proof needed to make your case. Miss the deadline, and you forfeit your right to appeal until next year. Give yourself more time by beginning to check the information used to determine your assessment before the tentative assessment role is set.
While you're checking on the exact dates with the assessor make an appointment to review the property-record card for your home. It includes lot and house size, the number of rooms and everything else used to compute the assessment of your home. You'll probably have to dig out an old bill to get your home's identification number for the assessor.
Then visit the assessor's office to copy the card for your records. While there, find out the guidelines for challenging your assessment and what constitutes proof. The assessor might also have brochures to help you through the process. Some states even have advocates who help you prepare and file your appeal. So be cordial. Another tip: "Don't call them tax assessors," says Joseph Hesch, the public information spokesman for the New York State Office of Real Property Services. "They're very sensitive about that because they assess value, not taxes. Politicians set taxes," notes Hesch. Simply call them assessors.
STEP 2: LOOK FOR MISTAKES
Take the property-record card home and carefully examine it for mistakes. Look for glaring errors such as the wrong number of rooms, a listing for a garage when you don't have one and dimensions for a lot larger than the one you own. Call the assessor's office immediately if you find any mistakes, in some locales, your word alone might be enough. But most municipalities require proof--photos, blueprints or inspection reports. Ask the assessor what's needed.
Although the information on your property card should be accurate and current, correcting a mistake won't always reduce your assessment. "If the error doesn't change your home's market value much, it won't affect your assessment," says Hesch.
What if the error is in your favor? Experts say you should probably admit it, especially if you plan to challenge the assessment on other grounds.
Your property-record card should also list any exemptions you're entitled to. Exemptions lower the assessed value of your home by a certain percentage. Common ones are those for senior citizens and veterans or spouses of veterans. Less common exemptions include those for low-income home owners, disabled victims of crime and those whose property is located in an economic improvement zone.
Exemptions for energy-efficiency improvements, restoration of historic structures and improvements that make a home more accessible to the disabled usually exempt only the value of the improvement from the assessed value of a home. Check with local and state authorities to find out available exemptions in your area.
STEP 3: CHALLENGING YOUR ASSESSMENT
If your property-record card is correct, or if correcting it has not changed your assessment, there still are two other grounds for appeal: Excessive assessment simply means your home is worth less than its assessed value. If you refinanced your mortgage within the past year, your bank or lender will have had your property professionally appraised. Get a copy of the report and see if this recent market value is lower than the one set by the assessor's office. If it is, use the report as proof.
If you haven't refinanced recently, check with local Realtors for the addresses and selling prices of similar homes in your area. The assessor's office can also help you locate comparable homes. Or you can pinpoint recent sales using a phone-in search service. These firms typically charge by the minute for phone time. Remember, the more evidence you gather, the better.
Having your home re-appraised is the most expensive option, though it's often the most effective. The word of a licensed appraiser will have more weight than other types of information. Professional appraisals typically cost $100 to $400. But unless you expect to reap large gains, a reappraisal might not be worthwhile. It's also possible that the value of your home has been decreased by conditions the assessor's office isn't aware of or has not considered. A cracked foundation, termite or carpenter ant infestation, the building or widening of a road next to your home or the placement of a new factory or dump nearby can all lower property values. So can environmental hazards such as radon, asbestos or lead in your home or a buried oil tank in your yard or driveway. But you'll have to prove it, and environmental hazards are trickier to prove than other conditions, since their effect on value isn't well documented.
Again, local Realtors can help you by revealing how home sales have been affected by these problems. Realtors can also provide information on cleanup cost. This is an effective way to determine how much each condition lowers the value of your home, since most buyers would want the problem remedied or the asking price reduced by that amount. Remember; get addresses and information on asking and selling prices in writing.
Unequal assessment means your home has been assessed at a higher value than comparable homes in the area. For example, suppose the value of your house has been assessed at $200,000. If you can prove the value of a similar home in your neighborhood has been assessed at $175,000, you can challenge your assessment on the basis of unequal assessment and have the assessed value of your home reduced.
STEP 4: INFORMAL MEETINGS
Think of the appeal process as a ladder. The first rung is requesting an appointment with an assessor. No forms. No costs. No sworn testimony. But don't be lulled into thinking this informal meeting is a simple chat where you point out errors and the assessor fixes them. Be prepared to prove your case. You should know what you want and why you're entitled to get it. And you should have all your evidence with you, including an extra copy for the assessor to examine while you talk.
Pay particular attention to the questions assessors ask; they're clues to what he or she thinks is important. Be calm, yet firm and persistent. Remember, what you're challenging is your assessment, not your taxes. Start proclaiming that your taxes are too high, and you'll lose credibility. Depending on the laws in your area, your assessor might not be able to change much at an informal meeting. If you get only some or none of what you ask for at this time, find out why. This is the part of your case you need to strengthen when you move up the ladder to a formal meeting.
STEP 5: FORMAL APPEALS
Formal appeals are not automatic. You must request one, get the proper forms, follow their directions to the letter and submit the forms and evidence by the deadline given.
Your local or state authorities probably have pamphlets to help you fill out the paperwork. They might even have staff or advocates who can help. Another good source to check at this stage is the case files of your local board of review - where your formal appeal begins. These records are public. Examine cases similar to your own to learn which strategies and evidence worked and which didn't as you prepare.
Most important, be careful what you ask for. In some states, you can only get the reduction you ask for even if circumstances show you should get more.
Your first formal appeal essentially is a hearing at which you present your evidence and the assessor also gives testimony. Again, it's up to you to prove that the assessor is wrong. Also remember that your case is probably one of many the board will hear. Make it stand out by being well-presented, well-organized and mercifully to the point. The board's decision will be mailed to you.
Even if your first formal appeal is successful, you will probably have to pay your taxes and then get a refund. And there might be some nominal costs for processing your paperwork. If you're not satisfied with the decision by the board, you might be able to appeal to a county or state board depending on laws in your area. There will be new forms to fill out and deadlines to meet and, possibly, more costs involved. But for all practical purposes, it's the same show for a different audience.
Before you take your show on the road, read the decision from your local board and make a photocopy of your case file. Why didn't you win? What points didn't you make during the appeal? Why wasn't the board convinced? Learn from your mistakes and capitalize on any the assessor made. Then be sure you really have something to add that will convince the county or state board that the local board and assessor's office are wrong. If you lose this second formal appeal, you can still take your case to court. But at that point you'll probably want to get yourself some legal help.
Challenging your property assessment is not without potential downsides. There's a chance the information that you uncover during the appeal process will result in raising your assessment, which will increase your taxes. Your local assessor's office can tell you this before you undertake the appeal. But in many cases, attempting to slash your property taxes is virtually a no-risk opportunity. And those are the best kinds.
excessive assessment and unequal assessment.