You've been watching the selling prices of your neighborhood's homes decline month after month. You're not alone. Single-family-home prices were down nationwide at the end of 2009, according to the National Association of Realtors.
But there is a bright side.
As home values decrease, so do property assessments. Just as assessments increased during the real-estate boom, now they should be lower. And a lower assessment means you'll pay less in property taxes.
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 final bill. As home values decrease, so do their assessed values. Homeowners end up paying less even though the tax rate stays the same.
The National Taxpayers Union, a Washington, D.C., advocacy group whose goal is to lower taxes, estimates that as much as 60% of taxable property in the United States is over-assessed. But despite the growing tax bills, only half of homeowners protest their assessments. That means many may be paying more 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 Illinois state Rep. Franco A. Coladipietro of Chicago law firm of Amari & Locallo.
Many taxpayers fail to fight because they don't understand the process (it is complicated) 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, the president of Straus & Co., a tax consulting firm in Dallas, calls the "cuss and pay" system. "They cuss the bill, and then they pay it," he says.
That's too bad, because appealing isn't as difficult as homeowners fear. In fact, it's something most can do themselves. Sure, the process is tedious and bureaucratic, says Pete Sepp, the National Taxpayers Union's vice president for policy and 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."
Continued: Know the appeals process
