Tuesday, February 03, 2009

Lowering our Property Tax - Doing it myself

Recently, we received the 2008 value assessment for our house. Much to my surprise, the value of our house had increased 3% from its 2005 assessment, which meant that our property taxes will be increased this year. However, based on articles I've been reading, it is more likely that our house value has fallen 18% or more. Therefore, I am filing a complaint with our county real estate office to reduce the appraised value of our home. Here are the steps I am taking:

  • Understand the review process. On the day I received the 2008 appraisal, I contacted our property tax office and requested information on how to revise the appraisal. In our county, the process begins with the submission of a revision request with accompanying data.

    After the forms were received, I called the office again to determine the best way to present my case. The property tax office was very helpful. They clarified questions that I had about the form and I spoke to one of the property appraisers to get his recommendation on acceptable approaches to contest the home value.

  • Get the data. According to our tax office, sales of comparable homes, preferably in the same neighborhood, within one year of the revision date can be used to determine the value of one's house. Adjustments can be made for differences in features (e.g. garages, basements, number of bedrooms) and square footage.

    From the county website, I was able to determine that six sales had occurred in my neighborhood within the two year time period. I contacted my real estate agent, who helped me purchase the house, and asked for a copy of the MLS sheets for each house.

  • Do the analysis. I have together a spreadsheet showing the house address, selling price, square footage, and major features (e.g. garage, number of bedrooms and baths, basements, etc.) to do an estimate of my home price.

    Based on a comparison of square footage, I believe my house value is about 20% less than the county appraised value. Most of the homes have similar features and therefore, I won't be making an adjustment based on features. For example, the county appraiser pointed out that a house with a finished basement would be worth more than one with an unfinished basement.

  • Make a persuasive case based on reasonable values. Using data from the analysis, I plan to put together a one page summary for the basis of my appraisal price. I will also include all the supporting data, e.g. MLS sheets, sales data, and the spreadsheet analysis, which show a possible range of appraisals from a 15% reduction to a 30% reduction in value, with the average being 20%.

    I will likely choose a number close to the average since a 20% reduction since it appears to be reasonable value based on the analysis.
  • For additional perspective, see 5 steps to slash your property taxes at MSN.com.

    Finally, I have thought two situations where reducing the appraised value of our house may not be a good idea.

    1. Selling the house in the near future. The appraised value will be available for prospective buyers to use in determining what price to offer. However, we plan to live here for a while and this is not a concern for now.

    2. Refinancing. The revision may affect the value for loan purposes, since reducing the value will reduce the equity. For us, this probably won't be an issue since we will still have 30% equity even at the lowest appraised value.

    I plan to complete and submit our documentation in February, 2009 and hope to have a favorable decision within a few weeks after submission.

    For more on Ideas You Can Use, check back every Tuesday for a new segment.

    This is not financial, real estate or tax advice. Please consult a professional advisor.

    Copyright © 2009 Achievement Catalyst, LLC

    1 comment:

    Anonymous said...

    You have handled this correctly. However, you should know that the assessed value will not affect a refinance, and it should not affect the price a buyer will pay. Bank appraisals do not consider what the tax assessor says your home is worth, and real estate agents tell buyers that the assessed value is not useful and to look at recent comparable sales instead.

    Assessed values are calculated differently in every state. Many states revalue annually using CAMA (computer assisted mass appraisal) modeling. Such models are expected to be accurate to within around 5 percent in a stable market. If the narket is changing rapidly and the universe of comparable sales analyzed includes older sales, the values in a changing market will be inaccurate.