How to Lower Your Property Taxes

It seems like every week I hear the same old story that home property values are continuing to decline.  But you know one thing that I don’t see dropping… my property taxes.   In fact, they went up again this year. L

If you feel that that your tax bill is too high, statistics show you are probably right.  According to this WSJ article, half of you may be paying too much.   Sadly, though, only about 5% of you will make an attempt to challenge the assessment because of the misconception that the process is too difficult.

So if you are a homeowner and you want to learn how to lower your property taxes, then today’s lesson may very well help you do that.

Let's begin by understanding the relationship between property taxes and housing prices.

In theory we should see a correlation between home values and property taxes.  Taxes rise when house prices increase and taxes fall when prices decline.  This simple relationship would hold true if taxes were a constant percentage of property value, assessments were accurate and timely and all property values increased at the same rate.  But because the tax system is much more complicated than this, it turns out to be very difficult to predict what property taxes will do. 

The assessed value used to calculate your property taxes is only part of the equation.  States, counties and towns are facing budget shortfalls and there is a lot of pressure to maximize revenue.  Politicians put pressure on the local assessor to keep that value as high as possible so they don’t have to raise the tax rate.  

So even if the assessed value on your home were to drop, theoretically you could still end up paying higher property taxes if they raise the tax rate.   

Will lowering my assessed valuation on my home hurt me when I go to sell?  Experts say no.  The reason becomes clear when you understand that these two home valuations, assessed and market value, are done for different purposes and within different time frames.  Assessments are done on a town-wide basis for purposes of collecting tax revenues.  An appraisal focuses on a specific property and compares its value to similar houses that have sold within the past six months and are within a mile of the property.  These two figures are rarely ever the same.

Nevertheless, if you really are planning on selling your home in the near future,  it may not hurt to keep the assessed value overstated.   I have seen realtors advertise "Come see this bargain home that is priced $100,000 less than the assessed value."  That type of advertising may work on buyers who do not fully understand the difference between market and assessed value.

But if you are planning on staying for a while, why be taxed on more than what your home is worth.

Here is what you can do:

First, look at surrounding home values.   If your next door neighbors have houses that are comparable in size and their property is valued much lower, that could be all the proof you need to lower your home's appraised value.  Property tax records are available online for everyone to see.  Find out what your neighbors assessed values are and if yours is out of line, point this out to your county assessor.   There could be a mistake.

Second, correct any errors.  You have a right to double check the appraiser’s work.  Look closely at your tax appraisal, as it was probably assessed from a drive by inspection.  Is the square footage wrong? Believe it or not, mistakes like this are fairly common.  Sometimes, the square footage might be inflated or the appraiser might have been under the impression that you had more rooms or a finished out basement.  In any case, those mistakes are easy to prove.   If there are any characteristics that would drive down the value of your property such as repeated flooding make sure to let the appraiser know.

Third, you can always appeal if you don’t get the desired effect.  The burden of proof though is on you.  You will need evidence such as comparable sales, sales documents and photos of your property to show that your home is overvalued.   For your comps, only include arm’s length sales, meaning a sale between two parties who don’t know each other.   Distressed sales, such as a divorce or foreclosure, are thrown out.   The problem you may have is finding comparable sales in this weak housing market.  Many people have been unable or unwilling to sell their homes.  If all else fails, you may hire a professional appraiser but you will have to shell out $400-$500.

I know for a fact these strategies work because I tried them out on my own home and was successfully able to lower my assessed value.  I guess it remains to be seen how this will affect my property taxes but it can't hurt. J

For your convenience, I’m posting the contact number for the assessor’s office in Greene and Christian counties:

Greene                 417-829-6502     Don Agee

Christian              417-582-4310     David Stokely

If you would like to hear my story or would like some guidance on your specific situation, my contact information is on my website at www.cpainthesky.com.

Let me know your success stories…