You could be paying more than you owe in property taxes.
In a hot market, owners often find themselves facing double, sometimes triple, increases in property taxes, according to the National Taxpayers Union, a Washington, D.C., advocacy group whose goal is to lower taxes. Now, with home values decreasing in many areas, owners may be stuck with a property assessment that's too high.
There is a remedy: Appeal the assessment.
How it worksProperty-tax increases largely are based on rising home values, not the increase of taxes by local governments. Different formulas are used to figure property taxes, but all depend on a home's assessed value. Some jurisdictions use a home's actual market value, while others use a percentage of a property's worth.
Whatever value is used, it's multiplied by the local tax rate to compute the property's bill. As home values increase, so do their assessed values. Homeowners end up paying more, even though the tax rate stays the same.
The National Taxpayers Union estimates that as much as 60% of taxable property in the United States is overassessed. But only half of homeowners protest their assessments. This means many may be paying more in property taxes than necessary."A property owner really should monitor his assessment every year, with a particular emphasis in a reassessment year, if applicable," says Franco A. Coladipietro of the law firm of Amari & Locallo in Chicago.
Many taxpayers fail to fight because they don't understand the process, or because they can't stomach doing the research and providing evidence to prove the assessment is wrong. Instead, they opt for what Glenn Straus, president of Straus & Co., a Dallas property-tax consulting firm, calls the cuss-and-pay system.
"They cuss the bill, and then they pay it," Straus says.
Swear aloud, then swing into actionThat's too bad, because the appeal work isn't as difficult as homeowners fear. In fact, it's something most can do themselves. Sure, the process is tedious and bureaucratic, says Peter J. Sepp, the National Taxpayers Union's vice president of communications, but it's no more difficult than representing yourself in traffic or small-claims court.
If you really don't have the time, hire a property-tax consultant or attorney to do the work. Many of these consultants charge on a contingency basis, meaning they'll take a percentage of the tax savings if they succeed in lowering your assessment.
"Fees are charged various ways," says Les Abrams, a property-tax analyst with Nearhood Law Offices in Scottsdale, Ariz. "Some will work on contingency, others will charge flat fees, and some will do work by the hour."
Know the appeals processIf you decide on a do-it-yourself appeal, you first need to establish your timeline. When do assessments go out? When is the deadline for appealing? Call your local assessor's office for this information.
The appeals process varies from locality to locality. So does the amount of time permitted for an appeal. In some cases, a homeowner might have only 30 days to appeal. In other jurisdictions, it could be 120 days.
If your request for an appeal arrives at the assessor's office even a day after the protest deadline, you're out of luck. You'll have to wait until the following year (or sometimes the next assessment, which could be longer) before you can appeal. Straus says you might want to send your request for an appeal by certified mail, so you'll have proof that it was received before the deadline.
Once you receive your assessment, it's time to build your case. It's not enough to bemoan how high your taxes are. Complaining about how those tax dollars are spent won't work, either. You need cold, hard facts.
Assessments can be appealed on two grounds: a mistake in the assessment of your house, or an assessment at a higher rate than comparable homes.
Correcting the mistakesMistakes happen more often than you think. Many assessors don't even come onto your property to inspect it. They simply compare a written description of your home with that of similar properties in your neighborhood.
Appraisers also may use historical information that's wrong. A home's square footage, for example, might have been incorrectly calculated on original construction documents.
Or the assessor may have a slightly different view than you do of your home. "The assessor may be counting a screened in porch as year-round living space, and you only use it in the summer," says Sepp.
Obvious mistakes aren't difficult to spot. Is the inhabitable-square-footage figure correct? Does the assessment say your home has four bedrooms when it has only three? But you also should consider comparing the assessment with a recent appraisal of your property. If you don't have one, hire an appraiser for a new evaluation.
Make sure that any property changes, particularly those that would negatively affect the value of your home, are part of the assessment. For example, maybe a bridge has gone out near your home, making your house less accessible (and less valuable).
Don't forget any modifications you've made. If you've torn down a garage to increase garden space, your home's value likely would decrease.
Look closely at your neighborsThe other way to challenge an assessment is to see how your home stacks up to comparable houses in your neighborhood. "Comparable" means homes of the same size, age and general location.
For example, Straus lives in a 550-home subdivision in Texas. But even within the subdivision, there are differences that affect value. Homes near a busy road in the community are valued less than those abutting a quiet creek.
You can find information on comparable homes and their worth at the assessor's office, or start with property-value sites like Zillow.com, Domania.com and Trulia.com. If you don't want to do the legwork yourself, hire a Realtor or an appraiser to collect the data. Straus recommends getting comparisons on five to 10 homes.Once you have your comparative data, go over the figures and decide whether you have a case. If you think your assessment is too high, contact your assessor's office and try to arrange a one-on-one, informal meeting. Sometimes simply pointing out the facts can be enough for the assessor to lower an assessment.
Straus says 95% of his commercial cases are settled informally without the need of a hearing. Just be aware that when you meet with your assessor, it's a negotiation. You may still end up with a higher valuation than you'd like, but one that is lower than the assessor's original appraisal.
Prepare to protestIf the assessor won't meet with you (and some counties won't permit informal meetings), or if you meet but fail to reach an agreement, the next step is to protest the assessment.
Ask the assessor about the procedures and deadlines for filing a protest. Follow the guidelines to the letter to ensure that your appeal isn't thrown out on a technicality.
Before your hearing, gather all of your evidence and put it in order. For example, you may want to collect photos of comparable properties or put the market data into a spreadsheet that makes it easy for the hearing officials to see the basis of your argument. Your presentation doesn't have to be as polished as Perry Mason's, but being organized will help you make the strongest possible case.
Consider sitting in on somebody else's hearing before your appeals date. You'll see how the board operates. You can also get a sense of which arguments do and don't work.
What if the board doesn't rule in your favor, despite your compelling presentation? You can go to court, but in most cases it will cost you more than the amount of tax money you might save. But you may not need to take such drastic action. Many states have a state appeals board, Straus says, where you can take your case if the local panel rejects your petition.
Just remember to stay composed and professional throughout the process.
"Calling them SOBs is not a good negotiation tactic," Straus says. "The appeal hearing is an emotional thing because it goes straight to your wallet, but you have to stay calm."
Published June 13, 2007