How to Reduce Your Property Taxes

In the mid 90s I owned 10 acres and a 10-bedroom, 18,000 sq. ft. home and my property tax bill was only $1100 per year.  This was a bargain compared to my recently retired father who lived in a new Michigan subdivision and was paying $5000!

With some coaching from me and a variety of tools, including a senior citizen homestead exemption, he was able to cut that bill in half.

The housing market may have softened, but many homeowners are discovering one place where their property values remain at peak levels: on local property-tax rolls. "They were valuing our home for way more than it's worth," says Cara Reeves, who recently saw the assessment on her three- bedroom home in Cincinnati jump from $251,000 to $334,400, pushing her latest property-tax bill up 82%.

Because many local governments assign values to properties in their jurisdictions only once every three or more years, many homes still carry assessments from the market's peak, in 2005 and 2006. Some of these valuations are only now being reflected in taxpayers' bills. As a result, the National Taxpayers Union, a nonprofit advocacy group in Alexandria, Va., expects local property-tax bills to increase at least 5% this year, on top of 7% to 8% average annual gains since 2001.

In response, homeowners in many parts of the country have filed a record number of property-tax appeals this year. You can lodge an appeal at any time, though if you want to affect your tax bill for the current fiscal year, you may have to file by a specific deadline.

If successful, your petition will result in a lower assessment. That doesn't always translate into tax savings, though: A municipality intent on raising revenue can always hike the tax rate for all taxpayers, which would reduce or offset any savings you're able to realize through an appeal. Still, most people who successfully appeal see savings.

Since months or years can elapse between assessments, discrepancies will show up, and no one but you is in a hurry to correct them. But your chances of a successful appeal increase if you can argue that your assessment is unfair--and have good documentation to make the case.

DO IT YOURSELF 

Experts advise taking one of three approaches. The simplest is to find evidence that the local tax assessor made a mistake when evaluating your property. Since many communities rely on drive-by inspections, this isn't a far-fetched argument. Perhaps the assessor assumed your home had more bedrooms, bathrooms, or improvements, such as a finished basement or attic, than it actually does. A second way to get your assessment trimmed is to marshal property-tax records to prove that homes similar to yours carry lower valuations.

Help is available. A mini-industry of consultants, attorneys, and real estate agents has emerged to assist homeowners in preparing appeals. But there are good reasons to do it yourself. For one thing, a professional may pocket a big chunk of your tax savings--some charge up to 50% of the first year's reduction. More important, some appeals boards are more sympathetic to homeowners who represent themselves, says James Lumley, author of Challenge Your Taxes: Homeowner's Guide to Reducing Property Taxes ($21.50; John Wiley & Sons (JWA )). Hiring a third party "can up the ante and raise the hackles of local officials," he says.

Your first stop should be your local assessor's office or Web site. There you'll find the forms you need to appeal. You'll also find assessments and descriptions of every property in town. Scrutinize your property's records for errors that may have artificially inflated the assessment.

It's a good idea to compare your assessment with those of similar properties. If you can find at least five that carry lower valuations, it will enhance your odds of success. Obviously, the more these properties resemble yours in size, location, upgrades, and the number of bedrooms and bathrooms, the better.

Be forewarned that in some states, even assessments on identical homes can differ dramatically. California, for instance, limits assessment hikes to 2% a year and does not bring the assessment up to market value until the house is sold. That means if the couple next door bought their home 25 years ago and you purchased your lookalike house last year, you'll have a far higher assessment--and there's nothing you can do about it.

Your home may also be overassessed if it has appreciated since the last review by less--or depreciated by more--than the average property in your area.  Look for proof by contrasting the recent trend in sales prices of properties similar to yours with that of the overall market for homes in your town.


Whatever you do, don't wait to file an appeal. Because many local governments limit refunds to the prior year's tax bill, you're unlikely to obtain a rebate for overpayments that build up over years.

How do you get started?  First of all, do some research to gather evidence that your property is overvalued by the taxing authority.  If your local appraisal district has a website, you might be able to research the property values of your neighbors' homes.  If they don't have a website, you'll have to visit the appraisal district in person.  To find your appraisal district's website, start from google.com and type in the name of your city and the term "appraisal district".

If you find that your house has a higher value than that of your neighbors, find out why.  For example, do you have more bedrooms or bathrooms?  Is your home on a bigger lot?  Does your home contain elements that drag down its value, such as bad drainage, bad wiring, an outdated air conditioning system?  Have homes sold for less than their appraised value in your neighborhood?  Have your immediate neighbors let the appearance of their homes slip dramatically?  Any of these factors can help you get your tax bill reduced

So how do you get started?  Again, do some research to find evidence that your home is overassessed.  Then contact the appraisal district and tell them you want to challenge your home's valuation.  They will mail you the forms to do so.  Be aware that there is a deadline involved and you only have a certain amount of time to contest your home's valuation after you receive your annual tax bill.  Don't contact the appraisal district if you don't have proof. 

Summary

Property Tax Assessment" and "Property and House Market Value" are entirely different concepts and numbers.

The KEY lies in you determining if your real estate property taxes are fair, or not.

  Get the sales ratio for the municipality Verbiage may be different from one municipality to another. Sales ratio could be ALSO CALLED director's ratio, the common level of 100% of true value, the average ratio, assessment level, RAR (residential assessment ratio), the equalization rate or something similar.

 Divide the assessed value on your notice by the sales ratio to find the “perceived” market value that the tax assessor thinks your home is worth. This is the actual value the tax assessor placed on your home and is the value you'll need to compare against comparable sold homes.

 Find a local real estate broker and obtain comparable property sold sales that are equal to yours in size and location. You NEED photocopies of sold homes from MLS ( multiple listing service) since this has “buyer” orientated features you can use to prove your case. This information is Not FOUND on automated sites and because you need to make ADJUSTMENETS for age differences, new roof, updated kitchen, bath, patios/decks, fireplace, vaulted ceilings, oak floors and other positive features (by which you adjust the value of your home lower) and RELATED ITEMS, you need this source.

Compare your comparable “sold” values to the “derived” market value that the town tax assessor gave your property. If the difference is significant enough, appeal it!

It is very important to ask the tax assessor what homes they will use to compare yours to. You need to do this since they are looking to set you up by using their evidence. They will use those comparable choices against you.

You'll need to poke holes into their argument and show false values they may attach to those comparables.

Make a written request via a fax to the appraisal district. Get that information in advance so you are prepared. Show how those homes do not compare to yours. This is an adversarial confrontation and you need to be armed with the evidence that the opposition is using. The Freedom of Information Act allows you to get this information. Smile, be friendly, but come armed with facts.

Use photos, have the Multiple Listing Service sold listing backup information to show that their homes are not comparable to yours. Then offer examples that you found for homes that are more comparable to yours in location, size, quality, age and condition. If there are differences, adjust dollar amounts for differences between comparables for age, size, location, quality, condition and the host of other factors .

Homestead Exemption

Most states offer another way to lower property taxes through what is known as the Homestead Exemption.  Most often, this is reserved for senior citizens and details vary by state.  An internet search will take you to the various state sites which offer information or contact your county assessors office. See the sample below.

http://www.flatrockmi.org/Nav/departments/Information.asp?profile=9&DeptMenuitems_id=82

NOTE:  This report has been compiled from various resources and personal experience.

  UPDATES...

1.  Zero in on errors.  Review your most recent assessment, (get one from your local city hall or assessor's office).

Look for any kind of error including small ones, such as listing 2-1/2 bath as 3.  This can increase your bill.  File any errors you find with the assessors office.

2.  Do a cost comparison - Free!  One key to a proper assessment is knowing the value of other homes in your neighborhood.  Use these free online resources to compare five similar properties.  If others are more than 10% lower than the value of your home, file a written appeal.

www.Zillow.com

www.Domania.com

3.  Get a tax exemption.  Depending on the state you live in, you may qualify for a property tax exemption.  Veterans, people with disabilities, senior citizens usually get this benefit but don't count on government officials to tell you...you'll have to contact the assessor's office to find which exemptions are available.