How to Reduce Your Property Tax Assessment

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The downturn in the real estate market has created a potentially ideal situation for anyone who holds real estate.  This is because you have a good chance of reducing your property tax assessment and thus your property tax burden by appealing the value.  I have saved thousands of dollars by appealing my property tax values, and you can as well.

Your property taxes are based on the “fair market value.”  The local tax assessor is supposed to determine what the “fair market value” is for every piece of property in a given jurisdiction.  When was the last time the tax assessor has examined the “fair market value” of your property?  When was the last time you examined the value?  If it has been a few years, it may be time to file an appeal with your “Board of Adjustment.”

The appeal process is fairly straightforward.  You do your research, fill out a form, get your hearing date and go to a hearing.  You should be able to do this by yourself, although you can hire someone who specializes in appealing property tax assessments. 

Before you decide if you need to appeal your assessment, here are three things to check.

  1. Make sure the tax assessor has accurate data on your property.  Does their appraisal accurately report the number of square feet, bedrooms and bathrooms?  Does their report show the proper type of heating and cooling systems?  These obviously affect value.  If the square footage is too high for example, get it corrected and the value adjusted.
  2. Examine how the tax assessor determined the “fair market value” of your property.  Usually it is determined through comparable sales or comps.  Ask for and examine the comps that were utilized.  Do they really match up to your property in terms of location, style, subdivision, etc?  Are the comps comparable in terms of renovations?  For example, do the comps have modern, renovated kitchens while your property does not?  These criteria can all be used to back up your argument for a possible reduced assessment.
  3. Has there been a reduction in market value in your area that has affected your property?  If so, you are going to need to justify your position with either comps or an appraisal.  If you have a recent appraisal, use it.  But you do not necessarily need one.  You can find comps in a variety of ways.  A realtor may be very helpful here, or you can search many databases that are available such as Courthouse Retrieval.

Once you have determined if you need to appeal and the basis for your appeal, it is time to plan your attack.  If your property info is simply misrepresented, that is a fairly easy fix.  Simply explain how the assessor’s data is in error and they will adjust the data and value.

Appeals based upon the “fair market value” and comps get a little trickier.  Find as many comps as you can to justify your position.  Comps should be as close as possible to the style and condition of your property.  Take plenty of pictures to justify your position.  Take pictures of the comp properties, of your property, or your un-renovated kitchen, anything that will help your argument.  Bring plenty of copies of all documents and pictures of your comp properties for the board to examine.  You may even want to create a spreadsheet listing your property’s features and the comparable properties’ features.

When you get before the board (which may be months after your application) you will have to defend your opinion of the “fair market value” against someone from the assessor’s office.  Let your research speak for itself. 

Here are some points to remember:

  • Some assessors will not allow foreclosure sales as comps as they are considered a sale from a non-willing seller.  In some areas this fact can make things really difficult since there are often no other types of sales.  Paying for an appraisal in this situation may make sense.
  • You have to use comps only for the year that your property was assessed.  Even though it is currently 2012, you may be appealing the assessment from 2011 (Remember government moves slow.).  So you can only use comps from 2011.  Be careful here and get clear info on what year you are appealing.
  • Do not think that just because you bought a property cheap from a “willing seller” that the sales price will become the assessment.  The assessor will still look at comps and consider your sale an “anomaly.”
  • Once the board starts discussing your application you may be surprised to find support.  Some boards are very sympathetic to property owners.  If they do support you let them do the work for you.
  • If you have investment property the board may want to know your rental income and then use some type of rent multiplier to find the value.  This scenario is especially true where the only comps are foreclosure sales that as I mentioned above often cannot be used.  So be familiar with this type of valuation.

In closing, examine your local property assessor’s data on your property for accuracy every year.  You would be surprised (or maybe not) at how often mistaken data is entered.  Take advantage of today’s lower market prices to get your property tax assessments lowered and put more cash in your pocket.  It is generally not that hard to do but you must do your homework and come prepared.  You will most likely get yourself a well deserved raise.

Photo: Clement B

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About Author

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

12 Comments

  1. It certainly pays to monitor the taxes each year as they seem to always only go in one direction. By keeping on top of it you pay your fair share and nothing more.

  2. “Do not think that just because you bought a property cheap from a “willing seller” that the sales price will become the assessment. The assessor will still look at comps and consider your sale an “anomaly.” ” –

    I totally agree with this statement. This is the exact situation that I am in with a few investment properties.

  3. Kevin,
    Thanks for this write up. Am getting ready to appeal the tax on few of the proprties we bought this year and found lots of useful information in this post.
    Tracey.

  4. Here’s an interesting twist on this topic. We recently purchased a property with taxes that are considerably higher than nearby comps. After speaking at length with the assessor’s office, I learned that the comps I’ll need to provide as evidence must be from the exact period when the property was last assessed..in July 2008 (ouch). So, regardless of the fact that property values have steeply declined in recent years, the value is assessed here in MT in 8-year cycles. To prove taxes should be reduced, I’ll need to produce considerably lower comps FOR THAT TIME.

    Additionally, we talked a bit more about how disappointed many people are with the resulting savings from successful appeals. In other words, if you are paying a Realtor or other professional to do accurate comps (MT is a non-disclosure state) and spending valuable time pursuing an appeal, make sure the money you’ll be saving is worth the headaches.

    Each state is different and has their own quirks, so be sure you completely understand what you’ll need to provide before you automatically assume it will be worth your while.

    • Kevin Perk

      Page,

      Yes each state is different. Here in Tennessee it is every four years. Like you, many do not realize that they may be appealing a value established years ago and that you cannot use today’s values when challenging the tax assessment, but values or comps from when the property was last assessed. It can be nerve wrecking!

      Good luck with your appeal and let us know how it comes out.

      Thanks for reading and commenting,

      Kevin

  5. In Colorado, a little know law requires the owner of rental property in a board of adjustment appeal to provide the tenants’ names and telephone numbers and the income from the renters.

    • Kevin Perk

      Ron,

      They will often ask for the rental income here, which I can understand. But I think giving out the personal information of others goes over the line. When they try and do that here I just say “various unrelated tenants.”

      Kevin

  6. I appealed for lst year and had my prop value reduced, and this year, in Aug received a refund check of $1400. A new letter from my bank says another check for $1400 will be sent in 20 days.

    naturally with this success, I want to appeal again. the housing market is on the up tic some here in 93001, and across the street a lawyer bought a small home for more than my home value — after the walls were pushed out, a new foundation added, hardwood floors installed and it has two bedrooms, not one and twice the square feet!

    Can you talk about getting comps from “so many days from the lien date” I believe I need comps from 30 days from Jan of the year being appealed (2013) So I am appealing this year’s taxes, not yet billed or paid, but the value has been set by the Assessor’s office.

    Thank you
    R Smith

    • Kevin Perk

      Robin,

      Call your local assessor’s office to verify the types of comps they will allow you to use. It will vary from jurisdiction to jurisdiction.

      Also ask them to provide you with the comps they used to set the value for your property. It is public record so they should have no problem telling you. These will provide you with a starting point.

      Good luck and thanks for reading and commenting,

      Kevin

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