That is the question! Whether it is nobler to suffer the slings and arrows of outrageous tax bills or appeal it.
The answer: Definitely Appeal It.
At the very least you should verify the accuracy of your assessment and the information contained on your Property Record Card also ask for a copy of all the procedures your particular district requires to file an appeal. So, what are assessments? Your assessed value is suppose to be the "fair market value" of your home and property. The fair market value is what an informed buyer would pay for your home assuming you are an informed seller. Confused? Put simply, market value is what your home should sell for under normal conditions based on recently sold similar homes preferably within your neighborhood.
Understanding your Property Taxes
One of the biggest misconceptions is that you are going to appeal your taxes. You're not! You are going to appeal your assessment. The value at which your city, town or county has set upon your home. Your assessment is multiplied by the tax rate to calculate your property taxes. Example, assuming your home is assessed for $200,000 and your tax rate is $2.50 per hundred. Your taxes would be 2000 X $2.50 or $5,000 annually. Not bad considering this year three neighbors with similar homes sold for $195,000. So, now you add the last equation into the way taxes are calculated: Equalization Ratio also called Directors Ratio.
The ratio to true value is calculated by the state tax division by comparing the sales prices of properties to the assessment. This reveals the difference between the market and the tax assessment in the district. So, if there has not been a revaluation, the ratio can be applied to your assessment to indicate the true value. Your ratio adjusted assessment can be successfully appealed if it is more than 15% higher than the true or market value. Since the assessor has a 15% range over and under of accuracy.
Equalization ratio is a percentage figure to true or 100% fair market value. If your town is at an 80% equalization ratio and has your home assessed for $200,000 at 80% equalization they are saying your home is really worth $250,000. Their assessed value $200,000, your calculations $156,000 (80% of $195,000). $44,000 difference or $1,100.00 in annual taxes too much (440 X $2.50). The battle begins!
Equalization ratios can change every year. If your town was re-evaluated for tax purposes this year your assessments theoretically should be at 100% of fair market value. Each year that percentage can go up or down depending on the economy within your area and the number of years that go by without a full re-evaluation. Are home prices going up or down?
So far you now know you need to find out three important factors:
1 - What is your total assessment?
2 - What is your current tax rate?
3 - What is your equalization ratio?
Appealing Your Assessment
Step One - Verify Your Information
Taxpayers are justifiably concerned about rising property taxes. But how can anger at higher taxes be turned into effective protest and a successful appeal of assessed value?
Step one should be to verify the accuracy of the information on your Property Record Card at your local tax assessor's office. Errors can be made for a variety of reasons. Square footage of the home, lot size, number of bedrooms and condition (good, average, fair, poor) are common areas to check for mistakes. These errors can occur since towns usually hire a "Re-valuation Company" to verify information about your home. Sometimes these re-val companies hire college students to collect data. Sometimes the errors are simply typographical in nature. Whatever the reason, verify the accuracy of the information contained within your assessor's Property Record Card.
Always remember to view the assessor's office as an ally, not an adversary. Employees of the office should have been trained to be calm, polite and helpful, but they are only human. If you're calm and courteous, they are likely to be more helpful and can concentrate on giving you the information you need for a successful appeal.
I can still remember my grandfather telling me as a child, "you catch more flies with sugar than you do with salt". Back then I could not understand why anyone would want to catch flies. I guess it's true what they say about "with age comes wisdom". Be wise in your actions. Complaining and screaming at the assessor about your outrageous property taxes will get you nowhere.
Step Two - Collecting Data
One of the best indicators of fair market value for a single family residential home is market activity. Buyers and sellers create market value by their transactions. In an appeal, the best evidence of market value is sale price - the price paid for similar properties. If qualified, they are called comparables by the appraisal industry.
What do we mean by qualified? Simply that the sale price is not always the same as market value. The assessor examines the sales as they occur, qualifies them and adjusts them for special circumstances that might decrease or inflate prices. A distressed sale or an owner in a hurry to sell might sell for less. If the seller included substantial personal property or provides discounted financing the sale price is likely to be inflated. You can check this at the assessors office on record forms known as SR-1A's. Just ask for them. The are very short and easy to read. If the sale can not be used for a tax appeal it is generally recorded here as unusable.
Although the sales comparison method is not the only approach available (cost and income approach to value are two others), comparable sales are recognized by courts as the best evidence of market value.
Sales similar to your home can be found by visiting your local real estate office and explaining to them what you need, by searching through SR-IA's, local newspapers or by asking the assessor. If he/she knows of any recent, similar sales in your neighborhood they usually will direct you where to look for the information you need.
One very important item to remember with sale comparison is to note any and all difference between the sale and your home. These differences need to be adjusted. For example, you have a colonial on one acre with 8 rooms, 4 of which are bedrooms, an inground pool, deck and is 19 years old. Your sales comparable is a colonial on one acre with 8 rooms, 4 of which are bedrooms, a deck and is 7 years old. You must add the market value of your inground pool to the comparable, subtract the market value of the age/condition difference from the comparable. This part gets a bit tricky. That's why there are professionally licensed real estate appraisers. Use good common sense and you'll get through it. Remember, you'll need at least three comparables to present to your assessor.
Conclusion
Now it's time to set an appointment with the assessor and review your findings. If you disagree with the assessor's decision the next level is the local Board of Assessment Review and if you still disagree the highest level of administrative review is the State Tax Court.
Although we would recommend the hiring of a professional state licensed/certified real estate appraiser, step one can be performed by a homeowner with a degree of success. Level two (The Board) and level three (Court) we strongly urge an attorney and recommend a professionally licensed/certified real estate appraiser. An appraiser can not represent you in court. He/She can only provide expert testimony on the preparation of their appraisal report.
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