If you want lower property tax rates, you’ve got to ask

October 3, 2011

For years, the mantra of American homeownership was to count on home appreciation. Every year like clockwork the value went up and houses were a  growing source of wealth.

Now, more than three years after the housing market imploded, the tune is different. It may make sense for you to prove that your home’s value has dropped so you can file for reduced property taxes.

This is the time of the year when local assessors send out notices of your home’s assessed value. Note, however, that this is not your real market value. It’s a base value that’s used to calculate your property taxes. If you want to reduce your real estate taxes, start with paring your assessed value.

You have a reasonably good chance of winning a challenge to your assessed valuation. It’s estimated that some 60 percent of residential properties are over-assessed, although only a handful of home owners appeal, according to the National Taxpayers Union.

As someone who’s volunteered with a local non-profit in Northeastern Illinois on property tax issues, I know it’s worth fighting assessments every year. Sometimes I win, sometimes I lose. If you feel that your assessment is too high, there are many ways to challenge it, but it takes some homework and diligence.

You can always start by checking the property record of your home, which is on file with the assessor. Does it have the correct number of bathrooms and bedrooms? Is the total living space correct? Does it list a finished basement in error? You can fix any incorrect data by either allowing the assessor to inspect your home or by submitting an approved builder’s drawing or survey.

Although you can dispute the assessed market value of your home with your assessor, it’s not an easy task since you may need at least three comparable homes in your neighborhood with lower values.

If you can’t reach an agreement with your assessor, then you’ll have to file appeals with your county and state property-tax appeal boards. Your documentation should be filed on time and you may be scheduled for a short hearing.

You can, of course, hire a consultant or lawyer to do the appeal for you, but they will charge a flat fee or take a percentage of your tax savings.

When going through this process, you may feel like it’s an uphill battle. It’s much easier for assessors to neglect reducing assessed values — even though home prices have plummeted 30-percent or more in many metropolitan areas since the housing meltdown began. They’re in the business of pooling money for the taxing bodies, not providing current market values.

Yet to get an idea on how much housing values have dropped, you need to consult some recent numbers from realtor.com, the main web site from the National Association of Realtors, the trade association.  Here’s a sampling of some markets that showed the largest year-over-year declines in median list prices, that is, what buyers were asking for homes:

  • Chicago: -14.9 percent
  • Las Vegas : -11.19 percent
  • Atlanta: -11.17 percent
  • Los Angeles/Long Beach: -10.99 percent
  • Detroit: -10.39 percent
  • Tampa/Clearwater:   – 10.26 percent

Of course, these markets have declined much more than these percentages show since the real-estate market peaked in 2006-2007. So you may be able to reap some genuine savings in your property-tax bill.

For the purposes of your assessment, you can generally only focus on the last year. Your mission is to show how similar properties in your immediate area have declined along with your home.

Assessors aren’t interested in national, statewide or even county housing prices, though. Stick to your neighborhood and get a professional appraisal for assessed valuation. And if there’s something that has reduced the value of your property — a recent storm, neighborhood deterioration, etc. — you should present your case with pictures.

Even if you get a reduction in your assessed value, you may not see a huge decline in your property taxes, if at all.  In most places, taxing bodies can still raise their tax rates or multipliers. When multiplied by your assessed value (minus any exemptions or credits), the rates will determine your tax bill. Unless subject to a tax cap, even in a sour property market taxes can still rise.

Since they are suffering from reduced tax revenue due to the housing recession, most public services are going to do whatever they can to ensure that they receive as much money from taxpayers as possible.  The good news is that, unless you employ outside help, it will cost you nothing to fight.

There’s a strange benefit in arguing that your home is worth less than the year before. While it may be a blow to your ego, it’s a fight worth waging that can make a difference in your tax bills in the future.

5 comments

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Even though the assessed valuation of the property has gone down, the tax bill hasn’t gone down because the county increased the other taxes included in the total collected.

Posted by LPavilionis | Report as abusive

I think your title to this story is wrong. This story isn’t about reducing someone’s “rate,” which is a legislative matter, it’s about reducing someone’s assessment.

Posted by PapaDisco | Report as abusive

The last area-wide reassessment that we had in our
Wisconsin community, I hired an appraiser who had double-
inflated his appraisal fee to do an appraisal on the very same day that the reassessor came. The two appraisals were $10,000 apart, the higher being the reassessor. The reassessor explained that a home owner overpays the first of the ten years, then they pay fairly, and then they underpay (if values are appreciating.) It all come out in the wash. I also discovered that there is a state-wide formula that all properties go by and you can’t fight with the formula.
Currently, the formula is such that homes should be over-assessed in the earlier of the ten year span, and is based on appreciating values.
If a home owner wishes to reduce their taxes, then they need to go after that formula. They need to contact their state representative, raise the roof, and have a formal review done.
This other way is nonsense. The likelyhood of any individual getting their taxes lowered individually is time wasted, a lot of money lost. What the reassessors say is in stone, until the whole state formula is made to change.
I’d take this article and put it in the garbage can.

Posted by limapie | Report as abusive

Why not ask for the right thing? Pay 10% more for a property to have it granted tax-free status, and clear govt debt with that. How so? Do the math on the interest on that premium, and you will see that is very close to property taxes. And we would all save the collection costs.

Mind you, you couldn’t allow the pols to spend it..

Posted by Humanismws | Report as abusive

Unfortunately, dropping your assessed value is no guarantee of a lower tax bill if your taxing bodies raise their rates. The only way to address that is to keep putting pressure on them to reduce their costs, no mean feat as they grapple with pension liabilities and lower tax revenues.

Posted by johnwasik | Report as abusive