JoAnn Palko has long been proud of her family's house in Lake County, Ind. And justifiably so: The three-bedroom brick bungalow boasts hardwood floors and soothing views of a quaint nearby park. But last summer, Palko gave a guest a tour of the house, and, figuratively speaking, she trashed the place.
That stove in the kitchen? It dates to Harry Truman's presidency. The tile floor? Just as old -- and made with asphalt to boot. And as for the upstairs powder room, let's just say that in terms of space and amenities, it might remind a visitor of pioneer days.
Blame Palko's mood swing on the most recent property assessment; the county raised its estimate of the house's value by 25%. So Palko has hired an appraiser to help her challenge the ruling by pointing out all the things that make her house look crummy.
Bringing him on board cost Palko $300, but it soon may pay off. According to the appraiser, the county has overvalued the home by $50,000. For Palko, it's ammunition for her fight. "This amounts to big savings," she says.
Because of the struggling economy, counties and cities are facing some of the biggest budget gaps in history -- and, because property taxes typically account for almost a third of a county's budget, many governments are gritting their teeth and raising them. Indeed, property tax revenues rose 6.2% in 2008, compared with 2.2% in 2005, according to the National League of Cities. But home prices plummeted as the housing bubble burst, leaving homeowners fuming over what seems like an expensive disconnect from reality.
According to the National Taxpayers Union, 30% to 60% of taxable property in the U.S. is overtaxed. "We're seeing assessments that don't make any sense," says Barbara Payne, the executive director of Georgia's Fulton County Taxpayers Foundation.
Granted, Americans have been complaining about these taxes ever since George Washington hurt his family's property value by cutting down his father's cherry tree. But today, Americans are fighting back, appealing their assessments in numbers that local officials say are unprecedented. In Texas' Collin County, near Dallas, appeals increased 38% from 2006 to 2009, a period when taxes went up even as local home values stayed flat. And in Las Vegas' Clark County, where home prices have fallen more than 50% from their peaks, appeals have skyrocketed 885% over the past three years.
Even former Bank of America CEO Ken Lewis has gotten into the act, appealing his Aspen, Colo., property taxes last year. Alas, he didn't get the $33,000 tab on his $19.6 million residence reduced, but 20% or more of homeowners do win on appeal, experts say.
Nonetheless, as they jump into the fray, many rookie tax warriors are learning that appealing an assessment can be just as quirky as any other facet of local politics. In many communities, assessors have great latitude in deciding property value. In Florida, an assessor can add or subtract worth based on a home's proximity to a noisy nightclub. Homeowners along the Nevada shore of Lake Tahoe are judged, and taxed, on the smoothness of their beaches.
The bureaucratic labyrinth is generating business for a new crop of assessment-appeal experts -- many of them appraisers and real-estate agents looking to make up income they've lost in the housing slump. Their reward is typically an upfront fee or a percentage of the reduction, whether a taxpayer gets $400 or $4,000 chopped off a tax bill.
Some taxpayer advocates question whether these services are doing anything that consumers can't do for themselves. "The appeal process," says Pete Sepp, the vice president for policy and communications at the National Taxpayers Union, "really is set up with the intention that homeowners can use it without third-party assistance."
But that process also varies widely by state and community, and for homeowners who have watched hours of research turn into months of waiting, the temptation to get help is strong. With or without help, many of those taxpayers are in for a chess match that can feel like a perpetual stalemate.
This article was reported by Alyssa Abkowitz for SmartMoney.
Published July 15, 2010
