The second biggest expense for homeowners, after the mortgage, is usually property taxes. With experts estimating as much as 30 to 60 percent of taxable property being over-assessed, that means there's a good chance you're paying more than your fair share in property taxes. Here's how to fight your property tax bill and get it reduced.
Every few months I wince when I have to write huge checks for school, village, and county taxes. This year, though, I winced a little less. My property taxes this year are 23% lower than last year, a savings of nearly $2,000 thanks to a successful tax protest (my second successful protest out of four tries).
Unfortunately, as Get Rich Slowly (which inspired this post) points out, fewer than 5 percent of property owners appeal their assessment. Perhaps the process seems complicated or homeowners aren't aware of just how much they could save. Even though the appeals process is only slightly more fun than filing your income taxes, the chance of saving hundreds or thousands of dollars is usually worth the few hours it takes to do this. Let's dive in.
How Your Property Taxes Are Calculated
Your property taxes are based on the "fair market value" of your home—the amount of money a buyer would be willing to pay for your home if it were for sale. This value is calculated by your county's assessor, but there's lots of room for error. Assessors can over-assess the value of your home by making errors in the total square footage, number of rooms, and other details. Also, because they don't generally send an appraiser to look at every house but rather use an automated valuation tool, assessors are unaware of aspects of your property that could pull down its value (and thus reduce your tax bill): Things like a leaky roof or old siding that needs replacing.
Every region is different too, and some counties don't update home values every year but rather do so every other year or even every five years. This means that when housing prices fall, you could still be paying taxes on the now over-assessed value of your home.
How to File an Appeal
The good news is once you successfully contest the assessment, that reduced fair market value is likely to stay the same in future years, unless your home value does rise due to improvements you make or a booming housing market. Here's what to do.
Step 1. Put the Filing Deadline Date on Your Calendar
Every year you should get a letter in the mail notifying you of your home's assessed value. The filing deadline to appeal is usually within a month of that notice, so it's important not to procrastinate on your appeal. (Get Rich Slowly's advice to put the filing date on the calendar is one I wish I had done in previous years; too many years I've forgotten about the assessment until it was too late.)
Step 2: Head to the County's Assessment Website
Every area has a different appeals process, so you'll need to go to your local government's site to get the complete instructions and forms for filing an appeal. Just search for something like "Orange county assessor." It's helpful to have your last property tax bill on hand, so you can enter your property's parcel number if necessary.
Step 3. Look for Mistakes in Your Property Description
The county site should list details used to assess your property. Check all of the information for any mistakes: number of bedrooms and bathrooms, property category (e.g., residential, one- or two-family), total square footage, garage, and everything else. When I filed my first appeal, I found the assessor thought I had one more full bathroom than this house really has (three and a half bathrooms is a bit excessive!). Even small mistakes, like incorrect room sizes could lower your assessment. The Wall Street Journal notes one woman lowered her assessment by 45% after discovering the assessor thought one room was 300 square feet bigger than in actuality.
Also, you might not have to do this for your appeal, but I found it strengthened my case when I included estimates of the value of those mistakes. For example, use Remodeling's cost vs. value report to estimate the resale value of an additonal bathroom (In NY, that's $19,000—so I subtracted that from the assessor's value in my letter to the assessor. More on that in a bit.).
Step 4. Find the Market Values for at Least Five Similar Homes
Assessed values and home sales prices for comparable homes in your neighborhood make the strongest case that your home is overvalued. Some counties make this data publicly available and searchable from the assessor's site, but for those that don't, you can use Zillow to search for recent (within three years) home sales. Save (e.g., in PDF files) the ones similar to your home that sold for less than your home's assessed value. Just make sure the properties you select are truly comparable to yours (in terms of size, number of rooms, and so on), and don't include "discounted" sales like foreclosures or short sales.
You could also get a real estate agent or an appraiser to help you find comparable properties, but paying for an appraisal could cost around $400-500 dollars. (I was able to use an appraisal report required for refinancing in my appeal, so that's an option for you if you recently bought or refinanced your home.)
Step 5. Make Note of Major Repairs Needed on Your Home to Make It Sellable
Take photos and make a list of things like a leaky roof, cracked drywall, or other issues. You could also use a home repair estimate site, such as HomeAdvisor or HomeWyse, to subtract those costs from your market value.
Step 6. Fill Out the Assessor's Appeal Form and Send in Your Evidence
Finally, file your appeal. Most counties do it in writing or let you file online. Here's a sample property tax appeals letter that you can send along with your appeal. It includes easy-to-read bulleted points like:
According to the Property Record that you have filed, I have noted the following discrepancies between your records and what is currently in my home.
- I do not have a deck as indicated. Estimated tax value - $2,200,
- My home does not have a 3 car garage as indicated. It only has a 2 car garage. Estimated tax value - $1,500.
- The home is not 1,800 square feet of living space as indicated on your property tax record card. I only have 1,000 square feet. Reduced value of $7,500.
Please deduct this amount from my assessment $11,200
After that, it's just a matter of waiting (months!) for the decision. If the challenge isn't successful, keep trying (you could possibly even appeal the initial decision or go to an in-person appeal). I filed an appeal four times, and was successful twice. After the last time my appeal was declined, I used a property tax consultant firm which basically did all of the above for me. It was expensive—40% of the year's tax savings (payable, though, only if the tax protest succeeded)—but I still get to keep the other 60% of tax savings. Assessors' offices often don't like when you use a third-party to appeal your assessment ("We make it so easy!" they say); it is simple enough for any homeowner to do, but depending on how much you stand to gain or how much time you have left to file, you might consider hiring a professional or going the DIY route first.
Either way, whether you live in a high or low property tax area, you could see substantial savings by exercising your right to challenge your tax bill.
Photos by JSlavy (Shutterstock), Pixel Embargo (Shutterstock), Images_of_Money.
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