Lower Your Property Taxes

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Last Updated Oct 26, 2009 1:23 PM EDT

Hear that sound? It's the thunder of angry homeowners stampeding to city hall after receiving their property tax bills. In Florida, condo owners are banding together to file joint challenges. In New Jersey, the state with the highest property taxes, appeals by Middlesex County residents tripled over the past year. And get this: The city fathers of Oshtemo Township, Mich., imposed a 1 percent fee to cover the costs of all the local tax appeals.

Though home prices have fallen roughly 18 percent a year since 2006, property taxes have actually risen ― by more than 7 percent annually on average. Lately, cash-starved municipalities have had to compensate for reduced state aid in order to avoid slashing their budgets. So they’re trying to hold the line on assessments.

The trouble is that many of the tax bills are flat wrong. The National Taxpayers Union estimates that 60 percent of taxable property is overassessed. Even accounting for the NTU’s antitax leanings, that’s a stunning statistic.

If you think your assessment is out of whack, fight back. As economist John Maynard Keynes said, “The avoidance of taxes is the only intellectual pursuit that carries any reward.” Although you can’t reduce your tax rate, you can challenge your assessment, which is the municipality’s estimate of the value of your house. A successful dispute could cut your property taxes by hundreds, even thousands, of dollars right away. “If you make a solid case for a reduction, you have a very good chance of getting some relief,” says Avi Spira, a New Rochelle, N.Y., attorney. “I’ve gotten reductions of $4,000 to $10,000 in my clients’ tax bills.” The best part: Those savings repeat year after year and could add up to tens of thousands of dollars over time.

What follows is a guide to a successful challenge. For more detailed advice, buy the National Taxpayers Union’s How to Fight Property Taxes ($6.95) or the American Homeowners Association’s Property Tax Reduction Kit ($29.95).

Decode Your Assessment

The first step in launching a challenge is understanding the way your assessment is calculated. While most states mandate that assessments represent 100 percent of market value — what the house would go for with a willing seller and a buyer — fractional assessments are common. “You could very well get a notice in the mail assessing your property at $100,000 when you know you could sell it for more than $200,000,” says Pete Sepp, a vice president with the National Taxpayers Union. “You think you’re getting away with something, but if the fraction your taxing authority uses is 40 percent, you’re actually paying more than you should in property taxes.” You can find out what fraction your taxing authority uses by calling the assessor’s office or checking its Web site.

Once you’ve calculated the town’s value for your home, if you think the figure is high (and, thus, your taxes), you’ll need to file your appeal immediately. “The deadline is usually 30 to 90 days from the date notices are sent, but I’ve seen deadlines as short as two weeks,” Sepp says. “If you miss it, you have to wait until next year’s window.” Many communities will send their next assessments shortly after January 1. The deadline for appealing is probably on your assessment notice. If not, call your assessor’s office and ask.

Get Your Property Record

Many incorrect assessments are due to errors in the property tax records, so get a copy of your record at the assessor’s office (or online, if the office has a Web site). The record contains the basic information used in figuring the assessment: square feet of the house and lot, number of bedrooms and bathrooms, special features such as fireplaces, and how the appraiser valued any renovations. But “assessors often make mistakes because they don’t have access to your home,” says Melinda D. Blackwell, property tax attorney with Brusniak/Blackwell in Dallas and past chair of the Property Tax Committee of the American Bar Association. The assessor or appraiser hired by his office may pull up to your house, take a photo, count vent stacks to determine the number of bathrooms, and measure the outside, but they probably will not ask to come inside (at least not every year). Consequently, the assessment might list more bathrooms than you really have, for instance. Simple errors then carry forward year after year.

Be especially vigilant if you got a building permit for a renovation. Say you applied for a permit to finish your basement and then put off the project. Your assessment likely ballooned to reflect a “finished” basement. Sometimes, assessors misread permits, too. “They assessed my new house based on the building permits and claimed it had five bedrooms and three and a half baths, but it has four bedrooms, two and a half baths,” Blackwell says.

If you find an error, it’s easy to correct. “You just pay a visit to the assessor and say, ‘Hey, I’ve only got two baths, not three, and my house is on half an acre, not a full acre, and I can show you the plat [survey map]. Very often, your assessment gets fixed on the spot,” Sepp says.

Grab Those Tax Exemptions

Many states offer senior citizen, veteran, disability, and homestead exemptions that lower the assessed value of a residence. These deductions can add up to hundreds of dollars a year, but they’re not automatic. Qualified homeowners must apply. Applications are available at the tax assessor’s office and, in many communities, a town or county’s Web site. The deadline for filing is usually the day the assessor sets your property tax status.

Launch a Genuine Challenge

If the property tax record data is correct and you’ve claimed any exemptions, but you believe your home isn’t worth nearly as much as the town says, it’s time for an official challenge. “That doesn’t mean rushing down to the assessor’s office and yelling that property values are in the toilet, and he’s screwing you,” says William J. Fleming, attorney with Fleming & Darrell in East Hampton, N.Y. Instead, says Fleming, prepare to put in some hours and effort to prove your case. You’ll be in an adversarial position and winning will require a solid, fact-based argument.

Your aim is to establish the actual market value of your house — how much you’d get if you sold it. The assessor will evaluate the market value you’ve put on your house against the valuation of similar houses in the same taxing district. “You can’t use a community’s overall drop in property values as proof,” says Richard Roll, president of American Homeowners Association. The best proof is a sample of five to 10 properties with the same specifications as yours but recent selling prices or assessed values at least 10 percent lower. (Some jurisdictions require an even larger disparity to even consider an appeal.) You can find specs by going through property tax rolls at the assessor’s office.

Unfortunately, the real estate crash has complicated this type of challenge, since the assessments on many of your neighbors’ homes don’t reflect their plummeting market prices. So, a more fruitful avenue might be establishing your home’s actual market value. To do this, you could hire an independent appraiser (typical cost: about $350 to $500) certified by the National Association of Independent Fee Appraisers or the American Society of Appraisers. Check with your assessor’s office first, though. Some jurisdictions will not accept an outside appraisal; others require the appraiser to report his findings in person, which adds to your expense.

Alternatively, you could collect sales price data on five to 10 houses that went for at least 10 percent less than your assessed value during the quarter before the last assessment. A real estate agent or professional appraiser might do this or you could use free sites such as Zillow.com and Domania.com. “Remember, the definition of market price is what you’d get if you had a willing buyer and a willing seller, so don’t include foreclosures or short sales in your sample,” says Blackwell.

Once you have the information, arrange an informal visit with the assessor. “If you can come to an agreement, it could save you from making a formal presentation,” Blackwell says. If you can’t, find out when the assessment review board meets and get on its calendar for an appeal.

Make sure your case is solid, since some jurisdictions make residents wait up to three years before they can try again.

Win Your Appeal

Three things will help you build a strong case that your assessment is excessive: facts, figures, and pictures. But review board members will be swayed not only by the substance of your argument, but by your style. A few tips on presentation:

  1. Watch someone else do it. If you can, attend an appeal board meeting a few days or weeks before yours to see how the members respond to a presentation. Tailor your approach accordingly.
  2. Keep it short and sweet. Be friendly and stick to the specifics of your appeal. Don’t make arguments about the national real estate market or the evils of taxes. You’ll be allotted something like 10 to 15 minutes. Don’t use it all.
  3. Hold your ground. Some board members may ask provocative questions such as “Would you sell your house for the assessment you’re suggesting?” Don’t bite. Instead, respond by getting back to the case, saying something like: “I’m here to discuss my assessment and believe I’ve demonstrated that it’s out of proportion with 10 comparable properties in my neighborhood.”
  4. Show and sell. Give the board pictures of homes similar to yours but with significantly lower assessed values. And show photos of your house’s features that should be subtracted from its value — if it’s on a busy street, for example, or the view sucks. Distribute handouts so every board member can follow your argument. These documents will also be a useful reminder when the board reviews your claim, which might not happen for weeks.

Expect to wait a few weeks or even months before the board rules on your challenge, typically in a letter.

If the board decides against you — despite your charm and careful preparation — the next stop is court, in most states. The conventional wisdom has been that only the most egregious overassessments were worth the expense of hiring a lawyer to go to court. But the calculations have changed. After all, your assessment review board may be turning down appeals simply because it needs to balance the town’s budget. The court will have no such conflict of interest.

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  • Nancy Smith

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