5 tips to turn lower home values into tax relief

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — One bright side of falling home prices: Homeowners may be able to snag some property tax relief by challenging outdated assessments.

“There’s no doubt that the number of appeals are up considerably as a result of the decline in the market. There’s no doubt there are many more meritorious cases,” said David B. Wolfe, a partner with the law firm Skoloff & Wolfe, in Livingston, N.J., and a member of the firm’s real property valuation and litigation departments.

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WSJ's Nick Timiraos has details of a plan to overhaul a mortgage-refinance program that would remove hurdles for homeowners. Photo: Brandon Sullivan for The Wall Street Journal

Nationally, home prices dropped 4.1% in July, compared with a year ago, and they are down about 31% since their peak, according to the S&P/Case-Shiller index. Read more: U.S. home prices up for fourth month.

But while prices are still dropping in many parts of the country, they’re not dropping everywhere. So beware: If you challenge an assessment and it’s discovered that the assessment is too low, you may end up inadvertently raising your tax liability, Wolfe said.

“You appeal at your own peril. If your property is under-assessed, your taxes could be increased by filing a tax appeal,” Wolfe said. “The fact that the market is down doesn’t mean that every property is over-assessed and entitled to relief.”

Before housing values started falling, an outdated assessment usually was to a homeowner’s benefit: Housing prices were only going up, and assessments lagged behind.

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“In the past, people would not care if they had a stale assessment because it worked in their favor. Now, with the reversal [in housing markets] it has changed things,” said John Schepisi, president of Schepisi & McLaughlin, a law firm in Englewood Cliffs, N.J.

Below are five tips for homeowners interested in appealing an assessment. Keep in mind that jurisdictions vary in the way they handle assessment appeals, so always reach out to your local assessor first so you know what the process is in your area.

1. Know the deadline

First things first: Check with the local assessor’s office to see what kind of deadline you’re up against for filing your appeal.

“The filing dates are different throughout the country. If you miss the date, you lose your right to appeal that year,” Wolfe said.

2. Look for obvious errors

Request a copy of your property record information from the assessor, and get a sense of whether there are any obvious factual errors about the home, Wolfe said.

For example, if the record says your house has eight bathrooms when it actually only has three, that could mean the home is assessed incorrectly, Wolfe said. 

3. Determine estimated value

Find out what your home is worth by searching for the values of comparable homes that have sold recently.

You can start your search with a site like Zillow.com to get a ballpark estimate of value based on recent sales, said Joshua Mungavin, a planning analyst with Evensky & Katz, a wealth management firm in Coral Gables, Fla. Realtor.com also allows users to search for information on recently sold homes.

But later in the process, you may end up needing the opinion of an accredited appraiser — especially if you have to go before a review board, Mungavin said.

Remember, the information you need to appeal is the actual value of the home, and comparisons of assessed value among neighbors often won’t mean anything to the assessor, Wolfe said.

“Many homeowners want to compare assessments. They want to go in and say ‘My neighbor is assessed for less than I am,’” but “the fact that someone could be under-assessed doesn’t mean you’re over-assessed,” Wolfe said.

Also note that in many parts of the country, assessments are based on a percentage of the value of your property, Mungavin said.

“A local government may dictate that assessors should use an 80% ratio. This means that if your house is worth $1 million, your assessment value should be $800,000,” he said. “Under these conditions, although a $900,000 assessment on your tax notice may make it seem that you are paying less than you should in taxes, in fact you are overpaying by 12.5%.”

4. Contact the assessor’s office

The best source of information on this is always your tax assessor’s office, Mungavin said. Someone from the office can often walk homeowners through the process of contesting an assessment.

In fact, sometimes homeowners never have to go before an actual board of review during the process of appealing, he said, and a property owner can get a resolution by working with the assessor’s office.

5. Consider hiring help

Some people will advise homeowners to hire an attorney to help them make their case. That may be a good idea if the process requires you to go before a board of review or if you simply feel overwhelmed or don’t have time for the task yourself.

“It’s an option. Is it necessary? No,” Mungavin said of hiring help to appeal an assessment. “I know people who have done it themselves.”

But if you do hire help, make sure their payment is contingent on you receiving tax relief, Mungavin said. Many times, payment will be a percentage of the homeowner’s tax savings over a period of years.

Amy Hoak is a MarketWatch reporter based in Chicago.