Personal Finance, Taxes, The Home 

Contesting Real Estate Tax Assessments

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About a month ago I received a tax assessment on the house I just bought and it, predictably, jumped to to around how much I paid for it. I began researching how I could go about contesting the property tax assessment because I didn’t want to pay so much in property tax but the situation looks bleak. On a philosophical level, I like paying taxes because they fund the very services I use every day but that won’t prevent me from legally finding ways to lower my burden (I think that will resonate with many people everywhere).

There are two reasons why the assessed value of a home would increase: natural market appreciation in the value of the home as a result of time, and, a change in ownership. I found myself in the practically incontestable second category.

In general, the assessed value of your home is supposed to be a percentage, set by law, of it’s true market value. Typically is a little bit lower but sometimes, for any number of reasons, it can be much higher than the market value.

Change In Ownership:
The new value of the home will be pegged to how ever much the new owner paid for it, which I think is probably fair to everyone except the new owner (with respect to taxes). Like baseball cards, the home is worth what the next person or family is willing to pay for it. In this particular instance, it’s very difficult to contest the value of the home for two reasons: 1) On a psychological level, you’re admitting to having overpaid for a home; 2) Much of the evidence you’ll need to prove a lower market value will not be there, such as comparable home sales. However, if you’re plucky, read onward.

Appreciation of Market Value
If a flurry of homes sell in your neighborhood, yet you stay put, you might be in for a shock because the market value of the home has increased, see comparable home sales as evidence. The best strategy is to visit your local assessor’s office and review the assessments of your neighbors who live in comparable homes (size, age, etc.). If they’re being charged substantially less, you have a shot.

Other Considerations:
Market value is actually only one of the factors you should check on your assessment. Mathematical or clerical errors are also possible so you should check the details of your particular lot or house (make sure everything matches). I mentioned earlier that the assessed value of your home is supposed to be a percentage, set by law, so you should look that up to see if the percentage is accurate.

I think I’m oversimplifying the contesting process, considering there are tons of books on the subject such as Challenge Your Taxes : Homeowner’s Guide to Reducing Property Taxes by James E. A. Lumley or Appeal Your Property Taxes — And Win — by Ed Salzman (I might visit the local library to see if they have copies) so if I’m way off base, let me know.

{ 8 comments, please add your thoughts now! }

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8 Responses to “Contesting Real Estate Tax Assessments”

  1. Caitlin says:

    my old company has a property tax calculator…it’s usefulness is debatable in “hot” real estate markets, but if you live in an area contained in their database of recent home sales and the market hasn’t exploded it can give you a quick view about whether to fight an increase or not.

    Domania’s property tax calculator

    beware of the shill-tastic nature of the site

  2. jim says:

    I filled out their form and this is, predictably, what I got:
    “Thank you for requesting your free home valuation from Domania. Currently we do not have enough information to compile an accurate report for you. However, your real estate agent will be able to assist you and provide you the requested information. They will be in touch with you shortly.”

    Ha, shill-tastic!

  3. Joshua K says:

    A friend of mine considered contesting hers, but they said they would have it re-appraised, and of course by now the value has actually increased significantly because of repairs and improvements. I don’t know about your situation, but I kind of figure that you may get the same result. It may actually be worse to contest them.

  4. Joshua K says:

    Oh yeah, another option, is contact a State Farm representative and get an insurance quote. They have an awesome tool that’s very detailed and provides an excellent approximation of the value.

  5. Caitlin says:

    Jim, it sounds like you live in one of the areas that they don’t cover. Though they tried very very hard to get home sales data for the entire country it proved impossible in some areas (texas is one, though that may have changed)

    The site was a bit shill-y when I was there, but now that it’s owned by lendingtree … well….it really just exists to push mortgages it seems.

    They used to have a GREAT home value estimator (that I helped build!) that had nothingto do with realtor’s bugging you but they have replaced that and seem to assume that if you want to know the value of your home it MUST be because you are about to sell or refinance.

  6. Terri W. says:

    Huh. Contesting your property value in Texas is apparently a whole different ball of wax than elsewhere. There’s a homestead exemption here, so in areas that have very low turnover [like, say … my neighbborhood] the tax assessed value of the home is way, way below the “real” value. So you know they love it when a new person *finally* moves in so they can up an assessment. And once they up your assessment, they can finally up your neighbor’s assessments because they’ll now have a recent comparable value.

    So, the year after you move in, you’ll get a tax assessment in the mail with what my realtor likes to call a “Come and See Us” eye popping assessment on it. But there’s an interesting two step at play here, and one that you’d never know about unless you’ve got an insider who’ll tell you it — and our realtor just happened to be a former member of the appeals board.

    So, technically, they’re not supposed to “know” what you paid for the house, though why this is the case, I have no idea. So, you go in to contest your assessment, and the first thing they say is, “Well, what did you pay for the house?” and if you don’t know what you’re doing, you tell them, and you’re stuck. If you have been coached, you say, “But I’m not contesting on sales price, I’m contesting on equity!” — which means that, hey, I checked all the records and all my neighbors are paying X/square foot in property taxes, and you are trying to assess me at X+Y/square foot, and that’s not equitable! But, of course, they’re trying to raise *your* assessment so they can go back to your neighbors and raise *theirs* so they are equitable with yours.

    I found it helpful to play very, very dumb and be opportunistically distracted by my infant baby when they really tried to press me for what our purchase price was. Which, by the way, they knew, even though legally they couldn’t use the number until I confirmed it. “But you paid X for your house!” “I’m contesting on equity!” Say anything but “Yes,” and the crazy dance goes on.

    Anywhoo, the appeals board sided with me because, hey, it wasn’t equitable! But it was the craziest experience, and if I hadn’t been coached, I would currently be paying 500 dollars more a month in property taxes than I currently am.

  7. Rick says:

    I just got a property tax bill for $550 for my new house…but that is only because it is still only assessed as the land. They have not re-done it with my house on it yet. Rumor has it that my entire tax bill will be jumping up to $11,000 next year, that is with school and property taxes. That is just insane. They estimated it when we closed to be $8000 or so. Needless to say, we will be looking for new places to live 2 years and a day from our closing date.

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