An experienced real estate broker or agent has the best data on recent home sales, listings and the knowledge to interpret that data to win a real estate tax appeal and reduce your property taxes.
Public tax assessors do not visit your home to value it. They don’t even do a drive-by. And they have less information than the MLS– sometimes only beds, baths, square footage. Besides being incomplete, the data may be inaccurate (just ask Zillow, who uses public data). In determining your home’s market value, the tax assessor usually just looks at recent sales in your area and picks a number, often based on the highest sale. Don’t fret. You can fight city hall, if you know how.
How to Beat the Tax Man
The key to winning a tax assessment appeal is accurate data (recent sales & current listings of appropriate comparables) and the ability to argue, with proof, that your home is distinguishable from the homes used by the tax assessor. Armed with MLS data, your broker has inside information the tax man doesn’t. This valuable information and the expertise to evaluate different property characteristics to distinguish them for market value purposes is what an experienced real estate broker or agent brings to the tax assessment table. You can forget about a lawyer. They are useless in this contest. The broker will win the case here. In those jurisdictions that allow it, an appraiser can also provide evidence of market value. No, you don’t ever want to use a zestimate. Zillow may try to persuade you of the value of a zestimate based on median error rates, but it won’t fly when talking to the assessor about your home.
What are your chances? According to the National Taxpayers Union, your chances of getting a lower tax bill are about 1 in 3. But like most statistics, ignore them. You lose little by trying. And if you lower your tax bill, it helps on a future sale to have property taxes lower than your neighbors. Also, in a time of falling house prices, you have a better chance of winning, since the public data, like Zillow’s, is lagging the market.
A few pointers when fighting your tax assessment:
- Ask to see a written notice of your appeal rights
- File your appeal promptly (use certified mail RRR), according to the instructions. Make a copy for your records.
- Ask for an “in person” appeal. It’s much better than just sending in paperwork.
- Ask the assessor for the information used to calculate your assessment, including all comps and data on your home — remember, the public data may be wrong, right David Gibbons?
- Get your local broker to gather evidence to dispute the market value– recent sales and current list prices of appropriate comps– and put it in a written report, very much like a CMA report.
- Document (photos) the unzillowables, like the sewer drainage pipe next to your shore house or the steep (useless) lot you’re on, as opposed to your neighbors. Remember, the tax assessor is unaware of these unzillowables when it comes to your individual house, right David?
- Hire an appraiser if you are allowed to (some jurisdictions forbid it)
Tip For Brokers/Agents: Since you know how to prepare a CMA and can evaluate market values better than any tax man desk jockey, why not advertise and market yourself as qualified to contest property tax bills. Owners love to save money (and brag about it when they do). Learn the appeal process by calling some tax lawyers or colleagues that may handled such cases. Get a few property tax appeals under your belt and you become an expert, adding to your arsenal of skills which set you apart from the competition. Knowledge is power. Some California broker is advertising this service on craigslist.org.
[Author’s experience: I have challenged my tax assessment on my beach condo the last two increases (because they were so unrealistic) and have won a property tax reduction both times. Once I was able to have them re-value a whole line of apartments because they did not assess equitably– 2 & 3 bedrooms on higher floors (mine) were assessed more than those on lower floors, which would have been OK except the same was not done for 1 bedrooms, all of which were assessed the same. Under the law, that’s a no-no. The reason I knew was because I had access to all the tax assessments in my building (they are public record) ]
Technorati Tags: tax assessments, propery tax appeals, Zillow, zestimates, MLS, CMA, real estate marketing
Excellent advice though the chances of you winning your appeal in Loudoun County seem to be a lot more slim than 1 in 3 from what I’ve heard from residents.
Your post definitely hits close to home based on my recent events and situation. Part 2 of that is sure to follow once the 2008 assessments are mailed out next week.
It’s easy to do in California.. Just get three comparable closed sales within the last three months and you are good to go.
Real estate taxes can really drain profits… nice post!
Danilo,
Regardless of the odds, go for it. As you gain the experience from these appeals, it can only help your future clients.
Great post! Most people tend to forget about the tax side of things.
I’m gonna try this. I have a situation on my street that needs to be address and this might work. Thanks! I’ll keep you posted.
Thanks Daytona. Good luck.
Good post (ignoring the corrections below) but I’d add that this advice should be tempered with a word of caution. I know it feels like you’re taxed to death but in reality, when property taxes are incorrectly assessed, nine times out of ten they’re incorrect on the low side. Tax assessors deliberately target assessments below market value (it makes no sense to knowingly overtax half the population.) So, the caution is this; if you know that you’re pushing your luck, you stand a pretty good chance of increasing your taxes by contesting them.
Now, on to the corrections:
1) We do not advocate just using your Zestimate value to contest your taxes. The Zestimate is a useful starting point when estimating home values but it does not replace the opinion of a local expert. That said, if your Zestimate supports your story, it obviously can’t hurt to take it with you.
2) Yes, public records can be incorrect but Joe, you seem to forget that Zillow does not only use public data to calculate Zestimate values. Zillow also uses homeowners’ additions and listing agent’s corrections to the public facts to further improve Zestimate accuracy. In fact, Zillow’s Zestimates are the only valuation tool to use additional information from agents and owners in this way. When you post your listings on Zillow, and discrepancies with the public record are recorded as corrections.
3) Zestimate accuracy is not only quoted in terms of median error; we also report on the number of Zestimates are within 5, 10 and 20 percent of sale price.
Hi David
In many of not most jurisdictions, you are totally wrong about contesting property tax assessments. In Maryland for example, if you lose the appeal, your taxes remain as calculated– they are NOT increased.
Also, since property taxes are assessed on market value, most people are smart enough to know when taxes are too high. And if they are not sure, ask a broker, or several, to give you the fair market value. *This will work far better than a zestimate, which is not even admissible as evidence of value in a tax assessor appeal.
As to your 2 proposed corrections:
1. Since I never wrote that zillow advocated anything, this correction is in error
In any case, You don’t want to use a starting point because it can be way, way off. True Mr. G?
See also * above. You are not suggesting that a zestimate is admissible as evidence of value in a property tax assessment appeal are you David? I hope not. It isn’t.
2. You said: “Yes, public records can be incorrect …. Zillow also uses homeowners’ additions and listing agent’s corrections to the public facts to further improve Zestimate accuracy.”
My reply: Therefore, if the homeowner does not correct an erroneous public fact on zillow IT REMAINS and erroneous public fact on zillow. True Mr. G?
3. OK, so in which % error group does this house’s zestimate fall in relative to the asking sales price?
http://www.zillow.com/HomeDetails.htm?zprop=32273620
Joe -
I didn’t say you taxes are increased if you lose your appeal. What I did say is that your taxes may be increased if you are pushing your luck in your appeal (as happened to these people: http://tinyurl.com/27924j)
David,
Here’s what you originally said:
“So, the caution is this; if you know that you’re pushing your luck, you stand a pretty good chance of increasing your taxes by contesting them.”
There is no need for caution on an TA appeal. A property tax assessment appeal is “contesting them”. Your taxes will not increase if you lose your appeal. The original assessment will stay in force. So, there is NO chance of increasing your taxes by contesting them, as you said.
Then you said:
“Joe -
I didn’t say you taxes are increased if you lose your appeal.”
Good, then we are in agreement.
As for the case you cite:
What happened in that case was the owner bragged about the value of his condo on “Rich & Famous” TV show and then he got a increased tax assessment. He looked foolish trying to say his house was worth less during his appeal. His taxes were not increased due to losing his tax appeal, it was due to the TV show.
This is equivalent to a homeowner increasing his zestimate and getting zinged with a higher tax bill. This could happen.
http://seattlepi.nwsource.com/business/285883_zillow21.html
Correct me if I’m mistaken but didn’t Rich Barton wait until he was about to sell his house to add data to increase his zestimate?
Isn’t it a fact that a homeowner could get a higher tax bill by adding data to zillow which would increase their zestimate?
If it is possible, then homeowners may chose to wait just before they sell to add data that may be missing from Z to increase their zestimate. Why tempt the tax man like the dumb ass on Rich & Famous?
Just to anticipate your reply that we should pay our fair share of taxes. Yes, but it is not a citizen;s job to do the taxman’s job for them.
I have a question…….
I just ran across the public record of a property as follows:
Cecil Jackson bought his condo in 1990 for $248K
Anne Hackworth bought it from Cecil in 2007 for $423K
Anne sold it back to Cecil 11 days later for $248K
What’s going on here? I don’t get it.