Property Taxes: Are You Paying Too Much?
by CR Staff
Of all the taxes you pay, probably none delivers more tangible benefits than the property tax you send to your city, town or county. Real-estate taxes are the lifeblood of local governments, accounting for some three-quarters of their budgets for schools, sanitation, parks and public safety, in short, for just about everything that makes the quality of life in your community what it is. But even if you're satisfied with what your property-tax dollar buys, you should not have to pay more than your fair share.
Your local tax office computes your annual property-tax bill by multiplying the local tax rate by the assessor's estimate of what your home and the lot it sits on are worth. The rate is set by your community's elected officials and applies equally to everyone. However, if you pay substantially more than your neighbors do or if your locality hasn't had a general property revaluation in several years, your tax assessment may be too high.
The most basic errors arise from a simple misdescription of your property in the municipal records, and this is where you should look first if you suspect a problem. The listing should specify the lot size, type of construction, number of rooms and so forth.
Overworked assessors usually cannot inspect every property they are required to value. Often they rely on casual "drive by" assessments, leading to mistakes in the property records, an extra bedroom here, a bath there, a garage instead of a carport. The assessor may also have missed defects such as a cracked foundation, a leaky roof or pest infestation that could significantly reduce a home's value. Undesirable environmental conditions, such as unusually heavy local traffic from a nearby freeway, can also lower a property's value and may be grounds for a tax reduction.
Most municipalities try to peg the assessed values of properties in their jurisdictions to the actual market values. However, unless the properties are reappraised often, something few communities do, the valuations tend to drift apart.
Some states try to bridge the difference during periods between full-scale reevaluations by applying a so-called "assessment ratio." In one New Jersey city, for example, a home carried on the tax rolls as having a market value of $100,000 would be taxed as if it were worth $106,952, after its ratio (currently 93.5 %) is applied. A homeowner who thinks this figure overstates the market value can challenge it, although in the Garden State, unless an assessment exceeds the estimated market value by more than 15%, the assessor's computation will prevail.
Many owners may be lulled by an apparently low valuation into thinking that their tax bite is lighter than it truly is. That's because some states tax properties on just a portion of their assessed value, as little as 10% in Louisiana. A fractional valuation, however, can mask a high assessment. For example, if you live in a $100,000 condo located in a state with a 25% valuation and your property is misassessed at $30,000, your tax would be equal to that of a neighbor living in a home worth 20% more.
There are several ways to document a claim that your assessment is too high. The easiest is to point out obvious discrepancies between the description of your home in the official tax records and its actual condition. Often the assessor's office will adjust your record on the basis of a single meeting if you can produce compelling evidence that the assessment is incorrect.
You can also buttress your claim by tracking recent sales of three to five homes that are similar to yours and located nearby. A local realtor, Consumer Reports Home Price Service or even the assessor's own records can help identify these comparable properties. If the potential savings warrant the expense, you may wish to hire an appraiser who is certified or licensed by your state to prepare a customized valuation of your home. Expect to pay between $400 and $500 for this service.
A formal appeal usually requires a hearing before the local appraisal review board. Typically, you'll have to pay all taxes due while your appeal is pending, though some municipalities will give a refund if you win your claim. Daunting as it sounds, most homeowners can manage an appeal by themselves. If you don't want to go it alone, a local real estate agent may be able to refer you to a property-tax consultant or an experienced attorney.
If too many owners challenge their tax bills successfully, of course, a local government would have to ratchet up the tax rate to provide the services residents say they want. But that's a fair way to meet the community's needs, and one that will let citizens know what good government truly costs.
Copyright © Consumers Union of U.S., Inc., June 1996. Presented in the public interest by NY Property Tax Reduction.