As Home values Rise, So Do Taxes
Tips on Appealing your Property-Tax Assessment

September 24, 2004

SAN FRANCISCO (CBS.MW) -- Even as many homeowners enjoy a dizzying rise in property values, they are getting blitzed with ever-steeper property-tax bills.

But instead of grumbling, consider appealing. There's a chance the tax assessor valued your home incorrectly, and appealing the assessment could save you hundreds of dollars in taxes a year.

"This is a time when homeowners need to be especially vigilant and knowledgeable because housing costs for middle-income Americans have been increasing faster than income levels," said Richard Roll, president of the American Homeowners Association.

Nationwide, median home values rose 24 percent from 2001 to mid-2004, and some regions saw much steeper increases, such as a 46 percent jump in the northeast and a 33 percent rise in the west, according to Deloitte & Touche's Property Tax Services Group.

Rising home values play a major part in driving up property taxes, but local-government budget crunches are also contributing to bigger tax bites, Roll said.

The average property tax paid nationwide rose 39 percent over the decade ending in 2002, according to the Tax Foundation, a conservative research group.

The property tax a homebuyer would pay on an average 2,200 square-foot home in Danville, Calif., near San Francisco, rose almost 57 percent from 2000 to 2004, according to Runzheimer International, a consulting and research firm. (The average includes the impact of newly constructed homes; a homeowner who continuously occupied a property during that span would not see the same increase.)

Other examples of property-tax increases over those four years, according to Runzheimer:

  • 53 percent in Alexandria, Va., near Washington
  • 49 percent in Yorba Linda, near Los Angeles
  • 47 percent in Kendall, Fla., near Miami
  • 37 percent in Roswell, Ga., near Atlanta
  • 32 percent in Chesterfield, Mo., near St. Louis

'Inexact science'

Tax assessors' methods for determining home values vary by municipality, just as tax rates do, but no matter the method, "it's an inexact science," Roll said. "They have a big job to do and limited resources with which to do it."

Getting a re-assessment is sometimes as easy as a conversation. "In many jurisdictions, you can have an informal conversation with the assessor and get your problem solved. They're not looking to have a costly process. If you have a clear-cut error ... they'll grant you a reduction," he said.

That said, before paying the tax bill homeowners should check the accuracy of the information used in their tax assessment.

There's "a sheet of paper or an e-record or a file of some kind showing how your property's assessment was arrived at," said Pete Sepp, spokesman at the National Taxpayers Union, a group that advocates for lower taxes.

Your tax assessor may value homes based on the estimated cost of replacing the house, the amount you paid for the home or by comparing local sales figures.

"If they use the acquisition value, you may find on your property card the sale price they recorded," Sepp said. "What if they have you down for $120,000 instead of $102,000?"

With assessments based on a home's replacement cost, the details matter: "What if they say you have three bathrooms if you only have two?" Sepp said. And the details matter when municipalities use comparative-sales data.

"What if they assume your house is a vinyl-sided house, but it's aluminum and has a leaky roof and all the comparable properties that they're using are in better shape than yours?" he said.

Keeping tabs on neighbors' values

After checking information specific to your home, compare your assessment with those of neighbors in similar properties. "You have the right to look at the assessment cards for every street," Roll said.

"Every property is different," Roll said. "You could have the exact same structure but one is on a corner lot or one is at the end of a cul-de-sac. That's a huge difference, even on the same street, in terms of desirability and market value."

Or maybe your lot, while the same size as your neighbor's, is on a steep hill, making it less valuable. Other possible factors affecting comparable home values: "One has a new roof and one has a 30-year-old roof. One has been modernized to oil and gas heat and the other has electric baseboard heat," Roll said.

Assessment reductions are also likely to be granted in cases where you have lost the use of all or part of your home due to a fire or other disaster.

Even if you don't find errors in your assessment, realize that the whole neighborhood might have been overassessed. "It's not uncommon. (Assessments are) done in clumps," Roll said.

Also, depending on your municipality, you might be eligible for a property-tax exemption, Roll said, which range from senior citizen and active-duty military exemptions to one for those who own livestock.

Success depends on local

The likelihood of successfully reducing your bill depends on where you live. In California, for instance, the property-tax law Proposition 13 means property assessments are based on what you paid for the home, and never rise more than 2 percent each year while you live there, unless you make improvements, at which point the value is reassessed.

"In most situations it's really not worth it" to challenge assessments in California, said Ed Sutton, an enrolled tax agent in San Francisco.

However, if the property value has dropped below what you paid for it -- not a likely situation now in most California markets -- you could request the assessor use the reduced property value in your tax assessment.

"Maybe you're in a neighborhood where you've had a lot of shootings. That drops the prices down," Sutton said, adding that after the 1989 San Francisco earthquake he successfully argued a number of homeowners' property-tax appeals.

Another potential place for wiggle room: Homeowners who've remodeled their homes might be able to contest the assessor's findings.

"Say I add an in-law apartment downstairs. I'm going to do the work myself, and the value I got a permit for is $20,000," while a contractor would have charged $70,000, Sutton said. The assessor may come in with a higher-end assessment which could be contested.

For more information, the American Homeowners Association offers a new "Homeowner's Property Tax Reduction Kit" free to members, and sells it to nonmembers for $29.95. Membership costs $99 per year and includes other benefits. See the AHA Web site for more information.

The National Taxpayers Union sells "How to Fight Property Taxes for $6.95." See their Web site.

Andrea Coombes is a reporter for in San Francisco.

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