Property Tax Appeals: How to Fight Back

The second biggest cost of home ownership - following the mortgage - is usually property taxes. In 2009 the average homeowner paid more than $1,900 in property taxes, according to the Census Bureau. And if you live in New Jersey, Connecticut, New Hampshire or New York, your taxes were in some cases double or triple the national average.
Despite falling home prices, property taxes are on the rise as strapped municipalities look to balance their budgets. Now more homeowners are appealing property tax assessments. Clark County, Nevada, for example, recorded its highest-ever number of property tax assessment appeals in 2010. And officials in Bremen Township, in Illinois, say they have received triple the number of inquiries for property tax appeals so far this year compared with last year.

The biggest variable in calculating your property tax bill is your home's value - and according to Charlie Walsh, founder of ValueAppeal.com, a website that helps homeowners contest their property tax assessments, there's plenty of room for error. Nearly three out of four homeowners win their appeals with the site's help, says Walsh - saving $839 on average.

Counties typically examine home values once a year or once every other year - and Walsh claims they over-calculate about 25% of the time. They may miscalculate square footage, or neglect to include key depreciation factors like structural cracks or deterioration of the home, drainage problems or neighborhood "value reducers" like re-zoning: "It's not like they send an appraiser to every house," says Walsh.

Instead counties rely on a service called AVM or Automated Valuation Model, which generally takes into account the number of bedrooms and bathrooms, square footage and recent sales of comparable homes in the neighborhood. Counties do not factor in nearby foreclosures or short sales, though - so while distressed homes do tend to bring down the value of neighboring properties, they're not factored into the AVM and won't help you win an appeal. "You're not allowed to use [foreclosed properties] in your appeal because, technically, those homes aren't 'comparable,'" says Walsh.

Every homeowner can rightfully appeal a property tax assessment by filing a complaint with their county or township's Board of Assessment Review or Appeals. Check their websites for appeals deadlines and a list of documentation you may need to file your case. The process can be long and arduous, so if you want to save some time and are willing to pay for third-party help, you may benefit from using a service like ValueAppeal or TaxRite. ValueAppeal costs $99 with a money-back guarantee if you don't win your case; TaxRite costs $129.95 with a similar money-back guarantee.

Fellow MoneyWatch blogger Nancy F. Smith also recommends the following books for more insight into the process: The National Taxpayers Union's How to Fight Property Taxes and the American Homeowners Association's Property Tax Reduction Kit.

Think you might be paying too much? Here's a list of counties with the highest rates of over-assessment, according to ValueAppeal's data: