Property Taxes–Slaying the Dragon
December 1, 1999
You are not helpless against the property tax bureaucracy. Every state that assesses them provides for the appeal of property tax bills. With knowledge of your state’s provisions and a few basic property appraisal concepts, you can take on and conquer the great property tax dragon and get over-assessed properties assessed properly.
Excessive valuation could be the result of either incompetent assessors, clerical errors, or a simple failure to take into account factors unique to your property. Usually it is the last. Appraisers do not individually inspect each piece of property in the county. They may take into account improvements on individual properties as evidenced by building permits, but the chances of them actually seeing your property is remote. And every property is unique.
Do not challenge any assessment unless there are clear grounds for reduction, and unless you prepare thoroughly. You will have to spend many hours preparing your appeal, in order to do an effective job. That is the reason many landlords choose to have a licensed appraiser take care of the appeal for them. Some landlords figure that their time is better and more effectively spent doing something else. Besides, appraisers’ fees are tax deductible.
Regardless of the time involved, in addition to saving money, there are some excellent reasons for taking care of the project yourself. The primary reason is practice. Going through the appeals process once gets you pretty good at it. Then if you ever have to do it again, it will be infinitely easier.
Tax assessors have a revenue enhancement trick I learned about from a former appraiser for the Multnomah County, Oregon Assessment Department. They overvalue properties just enough so that it is not worth the effort to appeal the assessment. For example, the county might over-assess an area so that the property taxes would only amount to only about $100 too much per property. It is not worth the time and work to appeal taxes to save $100; it would cost far more than that just to go through the appeal process. But the county makes out like a bandit (pun intended). Figure 10,000 properties, each assessed to bring $100 more than they should. That’s $1 million for bureaucrats to waste as they see fit. And for many properties it’s more like $400 or $500 per property over-assessed.
Grounds for Reduction
All too often the tax assessor has made an error. That error will be in one or more of five places. Those are the grounds you can use to get your property taxes reduced.
1. Mechanical errors: Is the building size correct? Did the assessor make a simple error in computation? Is the lot size correct? That is a figure you can check anytime, all you need is the printout for your properties from the county. County tax records are notorious for being incorrect as to the size of a building. Measure it yourself. If the measured size is egregiously smaller than what the county has, you have grounds to appeal. You might also find a math error. Check everything.
2. Is the assessment out of line with similar properties in the area? The most important test of the fairness of your assessment is not the market value, but the relation to the assessments on other properties in the area of the subject property. For example, if you own a four-plex that is of similar size and character to another one two blocks away, and the other plex is valued $20,000 less than yours, you have legitimate grounds for reduction.
3. Did the assessor follow the guidelines? Many states publish a valuation manual that assessors are supposed to use and follow. Usually it is available through your state’s Department of Revenue or Taxation (whatever they call it where you live).
4. Is the property appraised at more than its market value? Possibly all the properties in an area are over-assessed, not just yours. If you are a Realtor, you know full well how to do a Comparative Market Analysis. If you aren’t a Realtor, call one, he or she can do the job for you quickly and at no cost.
5. Is the assessment on the property legal? Perhaps some part of the property should be excluded from the property tax because of its type. Ownership or use could make it exempt. For example, property leased by a government agency from a private owner is usually not taxed.
With proper preparation you can take on the property tax bureaucracy and get your assessment where it belongs. What it takes is lots of hard work and perseverance, but the results can be worth hundreds of dollars to you.