How to challenge your assessment

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If you live in a city where prices have fallen 10% or more over the last few years, your property tax bill could be hundreds, if not thousands, of dollars too high.

For years, local governments have counted on higher home prices to boost tax bills. That's because what we usually pay in property taxes is the tax rate or millage multiplied by a house's assessed value.

But with the nationwide decline in home prices, you need to know whether your home is now overvalued -- and to challenge that assessment if it is.

In some places, challenging your assessment has gotten easier. For example, Florida state law changed in 2009 so that property appraisers must now prove their assessments are accurate. Before the change, the onus was on property owners to prove the property appraiser's assessed value was wrong.

According to Pete Sepp, vice president of communications for the National Taxpayers Union, homeowners who take the proper steps to appeal their assessments have a 1-in-3 chance of success.

Here are 7 steps to tell if you're a candidate to appeal your assessment and lower your property tax bill:

Step 1. Find out what your property tax assessment is and how it was determined.

You can see your assessment records at any time at your tax assessor's office or, in some counties, online. Search for "property tax" on your county's website.

Your property record usually includes the lot number, dimensions and features used to value your property along with the market value (sometimes called actual value) and the assessed value.

Interpreting your assessment depends on two numbers: fair market value and assessment ratio. Assessors use either replacement value or comparable sales prices to determine a home's fair market value -- that is, the estimated price a home would fetch if sold on the open market.

Replacement value includes the value of the land and the cost to rebuild the house at current prices. With comparable sales, assessors start with recent sales prices on similar homes and then add or subtract dollars to allow for differences among the properties, such as age, amenities like fireplaces and hot tubs, or damage like mold or dry rot.

In some places, the assessed value is the full market value. Other places, the assessed value is a percentage of the market value, such as 29% or 75%, which is called the assessment ratio.

Assessors don't appraise every home every year. A home's market value is usually updated when the home changes hands. The rest of the time, the assessor's office may apply average price increases from recent sales prices to adjust values for an entire area until the next full re-evaluation, which could be every three, seven, 10 or more years.

Ask the assessor when the last full appraisal was in your area and how your assessment value has been calculated since then. The longer the time since the last appraisal, the more likely it is that the assessment value is off.

Step 2. Check your home's assessment record for errors.

Make sure the description of your home is accurate. Verify the size of your lot, the number and type of rooms, and the square footage.

Look for mistakes, such as a half bath that's recorded as a full bath or a screened-in porch that's included in your year-round living space.

Ask the assessor's office to fix any errors and revalue your home based on the updated information. That's usually a simple process that requires you to fill out a form.

Step 3. Decide whether your home is fairly assessed.

Now that you know what the tax assessor says your home is worth, you need to determine its market value.

Ask the assessor's office for the comparable sales it used to value your home so you can see whether the properties are similar to yours. Look for differences that might affect the market value.

Do your own search of your county's property records for properties in your neighborhood similar to yours that sold in the past year or so.

If you don't find properties in your area, broaden your search to other areas with similar housing.

Websites that use public records and computer programs to estimate property values, such as Zillow.com, Propertyshark.com, Cyberhomes.com or Trulia.com, are another source for market values.

Don't be surprised if the estimates you get from these sites vary by tens of thousands of dollars.

But if the market values you find indicate your home is worth tens of thousands of dollars less than its assessed value, seek the advice of a local real estate agent you've worked with in the past or who recently sold homes in your neighborhood.

The agent can provide a much better estimate based on knowledge of the neighborhood, a computerized database of recent sale prices and a quick inspection of your home.

Step 4. Decide whether your potential property tax savings are enough to warrant a challenge.

Even if your assessment seems high, how much you can save depends on how much you pay.

States in the Northeast, such as New York, Connecticut, Massachusetts and Rhode Island, have some of the highest property taxes in the country. Southeastern states, such as Mississippi, Alabama and West Virginia, are among the lowest.

In Union Township, N.J., homes are assessed and taxed on their full fair market value. The owner of a median-priced $300,000 house, taxed at $2.27 per $100 of assessed value, would pay $6,810 per year.

If you convince the tax board to reduce the assessed value by 20%, you would save $1,362 a year -- a worthwhile payoff for the effort.

That's not the case in Iberia Parish, La., where the assessed value of a home is only 10% of its fair market value and the first $7,500 of the assessed value is exempt from taxes under the state's homestead exemption.

Under those rules, a median-priced $100,000 house taxed at 7.7 cents per $100 of assessed value would pay $193 a year. A 20% reduction in assessed value would save the owner only $38.

Step 5. Find out how your area's tax agency appeal process works.

If a challenge makes sense, call your property tax assessor's office or visit its website to see what you must do to challenge an assessment.

In California, for example, you can submit an appeal by mail or online.

In some areas, you must present your case to a board of equalization or other public body that hears and rules on assessments. But in most states, you just have to show the information you've gathered to a professional assessor.

Step 6. Prepare your arguments.

Make a list of your home's features: lot size, square footage, number of rooms, number and types of bathrooms, attached or detached garage, amenities and so on.

Then, look through sales records for nearby homes that have sold during the last few months. List the sales price and features to show how similar they are to yours.

Calculate the cost per square foot for each home. If most homes in your neighborhood recently sold for $150 per square foot, but yours is assessed at $200 per square foot, you're well on your way to proving your point.

Now, put comparable numbers for each property side by side in a chart or graph that visually demonstrates discrepancies in values between homes. Include pictures of the comps you used.

Include other arguments for lowering the value, such as location, potential flooding or a cracked foundation. A professional appraisal can help support your arguments.

Property tax consultants and attorneys can help you do this and represent you during the appeals process. But the cost could eat up any savings, and the work isn't hard, just a little tedious.

Step 7. Make your case.

Talking to an assessor is a negotiation. Diplomatically say that you understand that the assessor can't know every detail of your home, which is why you are pointing out items you think are incorrect.

"Present your evidence with confidence to show that you've done your homework," recommends Sepp. "Don't forget to ask for the market value that you think is fair."

If you're successful and the assessor agrees, you'll usually receive a document called a "statement of reassessment" or "adjustment of assessment."

If you are prohibited from meeting with an assessor or don't agree with the assessor's decision, the next step is to present your analysis to the appeals board, which may be at the county or state level.

To get a better idea of how the process works, attend someone else's hearing before going to your own.

Several organizations offer more information about reducing your property taxes.

The National Taxpayers Union offers for $9.95 a more detailed, step-by-step plan to challenge property taxes.

The kit on reducing property taxes from the American Homeowners Association costs $29.95, but you can get it for free by signing up for a 30-day trial membership.

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