Are You Paying Too Much Property Tax?

As millions of American homeowners are reeling from monthly mortgage payments that have gone sky-high, many municipalities are also raising property taxes.

To prevent from being squeezed in both ways, Early Show personal finance expert Ray Martin prepared a Q&A to help homeowners discover whether they can save some money.

Q: Are people paying too much property tax on their homes?

Some experts estimate that at least one third of all properties nationwide are assessed too high for property taxes. According to the National Tax Payers Union and the American Homeowners Association, as many as 60% of all properties nationwide is over-assessed.

Also, during the last several years when real estate values were rising rapidly, many local governments updated their property value assessments to reflect the current value of property. Most municipalities typically hire a company to do a "mass revaluation" or a "blanket assessment" to conduct a mass appraisal, which results in increasing assessed values to reflect the current market. Another method - called trending or indexing, which was reportedly used in Michigan - is to simply order assessors to reappraise all property within a district at a higher market value.

During these processes, new sales prices and higher real estate values are used to update assessments of newer homes. While these processes may be generally accurate, they will not consider the unique characteristics of an individual property which gives rise to many instances where these are a good reason to appeal.

If your home's assessed value was updated over the past several years, or if you bought a home during the height of the real estate boom and now property values in your local area have fallen considerably, it is very likely that your assessment is now too high and you are paying too much in property taxes.

Q: Why is it likely that your property tax is too high?

There are several plausible reasons why your home's assessed value and the resulting property tax you pay can be too high: Sheer volume alone increases the likelihood that errors can occur. There are more than 65,000 governmental taxing authorities, each with its own laws, rules and procedures for levying and collecting taxes on over 80 million taxable properties which are assessed a tax annually. Therefore it is impossible that such a system can take into account the unique characteristics of each property that is assessed.

Lack of qualified assessors: typically the person in this position of the local government is appointed to the job of property tax assessor and is no more knowledgeable than the average property owner in appraising properties, and is not required to be an expert in the field of property value assessment.

Property tax assessors cannot inspect every property: These individuals often perform this job part-time and lack the staff and resources to do a through assessment on every property. One property owner who challenged the assessed value of his property and tax was appalled to learn that the assessor had "looked at the house from the road," which is a common technique utilized in the assessment process. The particular property, set back some 50 feet from the road, failed to show the house was in poor condition and required significant repairs.

There is little incentive for your local government to help you to reduce your property tax: Property tax is the single largest source of revenue for local governments - usually over 80 percent of a local government's budget is paid by property taxes.