Clearly, housing is still in the dumps. During the second quarter, home prices dropped 15.4% over the same period last year, according to the S&P.
It's not pretty. But it's adding injury to insult to pay property taxes based on a home value assessed during the housing bubble.
Not all towns adjust their assessments every year to reflect the current market. While some municipalities do revalue properties annually, others do so every five years, says Sharon McCabe, associate director of the Graaskamp Center for Real Estate at the University of Wisconsin. So if your home was last assessed during the market peak, it makes sense to consider challenging the assessment, says Noreen Perrotta, money editor for Consumer Reports.
When to seek a reassessment isn't an exact science. It depends on how much your home's value has declined, and on what sort of dollar gain you'll likely get in your tax bill, says Keith Gumbinger, vice president of HSH Associates, a mortgage information provider. If you're paying $1,000 in property taxes and getting your home reassessed will drop that by 10%, you're pocketing $100 -- probably not enough to justify the effort of an appeal. But if you can save, say, $500 or more, it's probably worth it.
Here's what you need to know:
1. Know your town's methodology
There's wide variation in how towns assess properties, McCabe says. Homeowners should visit their assessor's office or check the assessor's Web site for information about when assessments can be done, what period they cover, and how and when homeowners can appeal those decisions.
2. Do it yourself
You may get mailed solicitations from real-estate agents or attorneys offering to help lower your property taxes by filing for a reassessment. But most homeowners can manage the appeal process on their own, says Tara-Nicholle Nelson, author of "The Savvy Woman's Homebuying Handbook."
Lawyers and consultants typically charge a percentage of your first year's tax reduction, perhaps as much as 50%. Don't want to pay a lawyer but want some hand-holding? The American Homeowners Association and the National Taxpayers Union sell property-tax-reduction kits ($29.95 and $6.95, respectively) that guide homeowners through the process. (The AHA's kit is a bit more comprehensive.)
3. Check for mistakes
Mistakes on property assessment records often mean homeowners are taxed at higher rates than they should be. The inaccuracy rate on home assessments is between 30% and 50%, depending on region, says Pete Sepp, spokesman for the nonprofit group National Taxpayers Union. "That could include very minor inaccuracies, but the statistics still warrant people to take a look to see if there are potential savings," he says.
The record might say, for instance, that your property lot is one acre when it's three-quarters of an acre, or your house has four bathrooms when it has three. If there's a flaw, "maybe you can correct it right then and there [in the assessor's office] and it wouldn't result in a long challenge process," says Consumer Reports' Perrotta.
4. Check out similar sales
If your town's assessment method is based on market value (as is often the case), homeowners should ask themselves: Could I sell my house for this much? If the answer is no, look at what comparable homes in your town have been selling for, Perrotta says. That means comparable in most ways: in the same school district, same number of bedrooms and bathrooms, same lot size. For example, if your three-bedroom house is currently assessed at $450,000, you need to show that similar three-bedroom houses in your neighborhood sold recently for less than that.
Use sites such as Zillow.com and Cyberhomes.com to search sales data of individual homes, Nelson says. But keep in mind that you may not know the special circumstances that affect individual sales. If, for instance, a nearby house recently sold for a much lower price than what yours is valued at, it could be because it just had a flood in the basement. "Homeowners have to know that just because they see a certain sale price doesn't mean their home is worth the same thing," McCabe says.
Also, some states, including Texas and Utah, are "nondisclosure states," which means their home sale prices are not matters of public record. If you're in a nondisclosure state, another option for finding sale prices is to ask a local real-estate agent for sales information.
5. Make your claim
Most appeals are submitted in written form to county boards with a statement explaining why you think the valuation is inaccurate, how much you think your house is worth and evidence to support that claim, Nelson says. In some places, there will be a hearing where you can present your case, after which you should be notified within a few weeks of the board's decision.
By SmartMoney
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