A month or so ago, most red-blooded Americans were poring over income tax forms, trying to wring out every last deduction and tax credit before the mid-April filing date. Yet the intense scrutiny that most people bring to the income tax has been curiously absent when it comes to paying property taxes.
Put off by the arcane details, the vast majority of homeowners submit meekly to the local tax authorities.
That is slowly beginning to change. As real estate markets have declined in recent years, especially in the Northeast and California, homeowners have begun asking more questions about their property tax bills.
Some people have challenged assessments of their homes’ value that did not decline as rapidly as the housing market, and along the way have won reductions in their assessments that translate into hundreds or thousands of dollars saved a year.
In any year, experts estimate that fewer than 5 percent of all homeowners bother to challenge their assessments and property tax bills, even though perhaps half of those who do win some reduction.
“I think people are afraid of the process,” said Charles D. Romalis, an appraiser who is a property tax consultant in Wayne, N.J.
It is not a system designed for easy access. Many lawyers and tax consultants believe that the calculation of property taxes has been made deliberately complex, in large part to ward off challenges. But with a little research, homeowners can determine whether their assessment is fair and whether they should challenge it.
While the details vary from state to state, and even from town to town, property taxes are usually derived from two numbers: the assessment, which is based on the estimated market value of a property, and the tax rate.
To determine a property tax bill, officials multiply the assessment by the rate, which is set by the local government and is usually expressed as a certain amount of money for each $100 or $1,000 of assessed valuation.
So if a house were assessed at a fair market value of $100,000, and the rate were $2.50 for each $100 of assessed value, the property tax would be $2,500 a year.
But many communities do not use fair market value as the assessed value. In Chicago and the rest of Cook County, single-family homeowners are assessed at 16 percent of market value. Outside Cook County, homeowners in Illinois are assessed at a standard 33 percent of market value.
Here’s where it gets really confusing though. Local officials often fail to say on the property tax bills what portion of market value is used to determine the assessment.
“I think they purposefully leave it complicated,” said Richard Fromewick, a real estate lawyer with Meyer, Suozzi, English & Klein in Mineola, N.Y.
Of course, any savings as a result of a property tax reduction may be diminished at tax time, since most homeowners claim the tax paid as a deduction on their federal returns.
There are a few fundamental questions that can help homeowners decide whether to appeal their assessments. The first is straightforward: Is the information that the assessor used accurate?
Virtually all local governments keep basic property information on file, either on cards or in computers, for use in determining an assessment. The list usually includes the number of square feet in a house, the amount of land, a sales history and perhaps details like the number of bedrooms and fireplaces.
“In many cases, it’s a simple matter of the accuracy of the assessor’s records,” said Pete Sepp, a spokesman for the National Taxpayers Union, a non-profit, non-partisan watchdog group. “A lot of assessments tend to get made from a car window.”
Homeowners should also find out what percentage of market value their assessment represents if tax notices do not tell them. Then they should calculate the assessor’s estimate of their property’s market value. If the estimate seems high, they can check with a local real estate broker or appraiser for recent sale prices of comparable houses.
To challenge an assessment successfully, a homeowner usually must provide examples of three to five similar houses. If the assessments on these comparable houses are lower than the homeowner’s, the challenge is likely to succeed.
The tax roll, which contains all assessments, is a public document in most communities and can be inspected on request.
Data on recent sales of houses can be more difficult to obtain. Sales data can come from real estate brokers, from businesses that collect and publish such information and from property records maintained by county clerks.
Homeowners sometimes can find this information readily in a local library; in other instances, they may have to spend some time hunting through property records in the county clerk’s office.
When lawyers take on a homeowner’s appeal, they generally get a fee equal to one-third to one-half of the homeowner’s first year’s savings. It may pay to hire a lawyer if the case is extremely complicated.
But homeowners willing to put in the time generally can appeal assessments on their own. And an individual homeowner can often be a more sympathetic witness before a property tax appeal board than can a lawyer or a professional appraiser.
For a fee, a professional appraiser or tax consultant will assemble a home appraisal and data on sales of comparable homes. Romalis, the appraiser in Wayne, N.J., said he typically charges a flat fee of $375 to $1,000, depending on the size of a home and the complexity of the case.
