HOW TO LOWER YOUR PROPERTY TAXES
Home prices are still going down in many markets. But your property-tax bill might well be going up. The good news: There are ways to fight back.
Property taxes across the U.S. have increased by nearly 20% from 2005 to 2009, the most recent data available, according to an April study by the National Association of Home Builders. The median annual real-estate-tax payment was $1,917 in 2009, up from $1,614 in 2005. Over the same period, home prices in major urban centers fared badly, decreasing 31%, according to the Standard & Poor's/Case-Shiller 20-City Composite Index.
Property taxes don't move in lockstep with home values because local governments typically don't measure values every year and some have limits on annual property-tax increases, says Natalia Siniavskaia, a housing-policy economist at the home-builders group. That means your current property taxes might reflect your home's value when the market was healthier. Property-tax adjustments lag behind changes in home prices by an average of three years, according to the Congressional Budget Office.
There isn't much you can do about your property-tax rate, which is set by your local government. But homeowners can often get their assessment lowered if they appeal to their local assessor. That can translate into a lower tax bill.
More than half of homeowners are paying too much in property taxes, says Jim Kane, Chicago-based managing director of True Partners Consulting, a tax advisory firm.
One key to a successful appeal: fact-checking the assessor's work. About half of all successful appeals come from homeowners pointing out an error in the assessor's description of their home, Mr. Kane says. Such errors can drive up a home's value. To understand how these mistakes happen—and how to correct them—it is important to keep in mind how your local government assigns a value to your home.
Local officials can assign a value to your home using house-by-house appraisals, computer models or even aerial photos to gauge how many rooms are in a house or whether there has been a new addition, such as a deck or swimming pool. But it's difficult to look closely at each home every year, so officials will also update home values based on recent home sales in your area. The superficial nature of the assessments means details can be overlooked.
That is what Lynne Weaver, a Phoenix retiree, discovered after her property-tax bill started climbing. To figure out why, she says, she went on the Maricopa County, Ariz., assessor's website and discovered that a handful of her neighbors' homes were assessed for as much as $205,000 less than her own property.
Ms. Weaver says she didn't think the number was accurate because her neighbors' homes were similar to hers in construction and acreage, but had backyard pools and other amenities. Her home had "grass and flowers" in the backyard and an unfinished basement, she says.
She appealed her assessment nearly half a dozen times over the course of six years before she stumbled on the problem: The assessor had incorrectly said a room used as an office was 300 square feet larger than it actually was. Armed with that knowledge, she successfully lowered her property assessment by 45% to $390,000 in 2010 from $709,715 in 2009. The lower assessment cut her 2010 property-tax billto $3,257 from $5,597 in 2009.
Paul Petersen, spokesman for the Maricopa County assessor's office, says errors of that magnitude are uncommon. But errors can happen, he says, and that's why "we expect the public to help us be more accurate" and appeal if it's warranted.
Local officials say they expect appeals from property owners if it's warranted, so don't be shy. "The appeal process is part of the mass appraisal process," says Burt Manning, chief appraiser for Fulton County, Ga., which includes most of Atlanta.
Most local governments allow residents roughly 10 days to 30 days to appeal their assessment after notification. To figure out the timeframe in your county or city, check your reassessment notice, which is typically sent in the mail, or call your local assessor's office.
Ms. Weaver's case points to the importance of ensuring your assessor has accurately described your property. To do this, you will need to review what is called the "property record card," a summary of the characteristics of your home. Make sure there isn't an extra bedroom, say, or three bathrooms instead of two. Extra features can drive up the value of your home. You can usually find a description of your home on your assessor's website. If not, you might have to visit the assessor's office..
Look closely at the assessor's description of your home to ensure that any characteristics that would drive down the value of your property—repeated flooding in your backyard, for instance, or a leaky roof that would be expensive to replace—are duly noted.
The key to a successful appeal of your property value, experts say, is comparable sales, or "comps." The weak housing market means there aren't as many people selling their homes, making it difficult in some places to find comparable sales.
(Exerpted from an article by Jeannette Neuman and Saabira Chaudhuri)
