Housing Prices Spur Property Tax Appeals

BY AMY REEVES

INVESTOR'S BUSINESS DAILY

Posted 10/30/2008

As if it weren't bad enough that one's home may have fallen 20% or more in value since purchase, the property tax bill can add insult to injury.

"Property tax assessments are going to lag a little behind (real home values)," said Eric O'Keefe, editor of Land Report magazine. "They're not in real time."

The gap between full assessments can range two to 20 years depending on jurisdiction. Typically it's the lower end of that range, but a lot can happen even in a few months.

For homeowners hit by value declines since the end of the housing boom, a year's lag can make a huge difference in their tax bill. So it's not surprising that many are appealing their property tax assessments.

In parts of Northern California, assessors have reduced tax values on nearly a third of residential properties, many bought in the boom. Property tax appeals are running four times higher than last year in El Dorado County, near Sacramento.

Nationwide Appeal?

In Southern California, the Orange County Register reports that its populous district is seeing 72% more appeals than last year.

Meanwhile Georgia's Macon and Bibb counties plan to add another tax-assessment office to deal with a burgeoning workload, while "unprecedented" appeals are cited in a report from the New Orleans area.

Those in the tax business are sensing a nationwide trend.

"All we can tell you is that, anecdotally, we've seen more interest," said Pete Sepp, spokesman for the National Taxpayers Union, a nonpartisan group for tax limits. "Clearly individuals are more motivated than they were a year or two ago."

It doesn't cost much to try getting property taxes reassessed lower. The procedure varies from state to state, but generally filing an appeal costs $25 or less — in some places, it's even free. Some localities, such as Fairfax County, Va., let a person do the whole procedure by mail.

The main limitation is time. The window for filing an appeal may be as little as 30 days after a homeowner gets an assessment. Be prepared to swing into action to make a case.

There are two main reasons to adjust an assessment, according to Sepp. One, the assessor may have incorrect data on the home — the square footage, the number of bathrooms, or some such thing. These matters can be readily cleared up with empirical proof.

Today's Big Issue

The more likely cause of a reassessment these days, however, is a change in the market value of a property. That can be a trickier thing to prove, as an owner has to show that properties comparable to his own are going for lower prices.

So where does a homeowner start? Some appraising agencies put their data online, which can make it even easier to find general standards of assessment. If a homeowner can find another property that seems similar to his own on the relevant points, and it has just sold for less, that could be all the data needed.

But for evaluating one's own property, O'Keefe suggests finding out who originally appraised it, and giving him or her a call. With a storehouse of data on local properties, appraisers can easily make updates.

"Personally that's what I did," he said. "I saw a jump in the assessed value of my property, so I called the original appraiser and asked, 'Has it really gotten that much appreciation?' They said yes, because the appraiser had done an update."

Homeowners can also request documentation, such as worksheets and paper records, on how the property was assessed.

When Finding Fault Is Good

This can be a good place to spot errors in an evaluation, such as if it claims a new roof has been added when in fact it was just patched.

Sepp advises homeowners to swallow their pride and see all of their property's faults. Each of them could reduce the tax bill.

"Why pay for drawbacks to your home?" he said. "You might as well point it out to the assessor, because anybody who seeks to buy it will find it immediately. It's not like you're keeping some secret."

A homeowner still not sure of a property's true worth could hire his own appraiser to reassess it. But, of course, the homeowner would have to decide whether the $300 to $500 typically paid for such an appraisal is worth the potential tax savings.

Mostly Do-It-Yourself

Owners of commercial property, and those with a lot riding on the outcome, might want to hire a lawyer.

But both O'Keefe and Sepp say it should not be necessary for the ordinary homeowner to hire legal help. Most appeals boards are made up of local citizens, so a homeowner doesn't need arcane technical knowledge to make a case.

The main roadblock one is likely to meet is that governments don't want to give up a source of funds — especially true in the current tight times.

O'Keefe suggests gauging the mood of the municipal board.

"Are they pro-development?" he said. "Are they interested in trying to encourage certain types of investment in the area? If so, they might be more lenient."