David Hester, an investor in Colorado, thought his property tax bill was too high. So he marched off to the statehouse to challenge it, armed with photographs, appraisals and maps. He also brought along a bag of groceries.
In the hearing, Hester began waving pieces of fruit in front of members of the state Board of Appeals. “Like these apples and oranges,” he argued, “my house isn’t anything like the other houses you’ve compared it to.”
The gambit worked. The board reduced the valuation of Hester’s 5,000-square-foot home. His assessment was lowered, after months of appeals, to $390,000 from an original $516,000, saving him $1,200 a year in taxes.
Not every unhappy taxpayer is willing to stage such a colorful protest, of course. But more homeowners than ever are likely to find something to complain about when the bill comes. That’s because home prices across the country are soaring, and assessments are typically adjusted to reflect changes in market value. During the fourth quarter of 1998 alone, home values shot up 3.3 percent throughout the U.S., according to a Freddie Mac index; in that same quarter, annual home-price appreciation jumped 4.8 percent from the previous year.
The good news for homeowners, as Hester discovered, is it’s far easier to get property taxes lowered than many people realize. In an age when assessments are increasingly determined by computer models rather than by eyeball inspections, errors have become more common and review boards sympathetic. “Homeowners usually win” challenges to their assessment, says Chicago tax attorney Thomas Flanagan. What’s more, he says, he’s “never seen an assessor increase an assessment because of a protest.”
A few homeowners go too far. “Some people just try to hoo-doo you,” says Roanoke, Va., appraiser John Willey, who once unmasked a property owner who had falsely claimed his property was a ranch–which would be assessed at lower rates than residential property–by borrowing cows from a neighbor. “I noticed there weren’t any cow pies in his yard,” Willey says.
Although no national data exist on how often assessments are wrong, audits by state agencies have turned up significant variations. For instance, a 1997 review by the Illinois Department of Revenue showed that assessments in the state’s most populous county, Cook County, missed the mark by an average of 17 percent.
“I don’t think that’s horrible,” says Mike Klemens, a department spokesman. Still, to encourage more accuracy, the state gives assessors in heavily populated counties a $3,000 bonus if the margin of error on their assessments falls below 15 percent.
Errors are rife because many localities only conduct inspections every five or 10 years. Also, annual assessments are increasingly made on the basis of “mass appraisals”–that is, computer models that extrapolate values of a whole neighborhood based on a sampling of home sales within it.
The computers make adjustments for additions, decks and other improvements, but only if the owners bothered to get permits for the work. And they miss altogether the nuances that might affect home value, such as views, landscaping and general maintenance.
So while assessors generally get the values of whole neighborhoods right, the information on any particular property may be dated and incorrect. “I suspect I could go in and find something wrong on everyone’s assessment,” says veteran assessor Richard Southern, past president of the American Society of Appraisers. That doesn’t mean most homes are over-assessed compared with their true market values. In fact, Flanagan, the Chicago tax lawyer, says he believes 90 percent of all homes are actually underassessed “by a substantial amount.”
Depending on local law, assessments are supposed to be either equal to a home’s market value or be a fraction thereof; they are multiplied by a specified tax rate to determine the property tax.
In Illinois, a property tax equalization factor (also called a multiplier) is used to achieve uniform property assessments throughout the state.
In Cook County, local law allows assessors to assess residential property at 16 percent of market value while other counties throughout the state fix assessed value at one-third market value.
The state determines the multiplier for each county each year by comparing the actual selling price of individual properties to the assessed value of those properties by the county assessors.
To challenge an assessment as too high, a homeowner needs only to prove that it is factually incorrect or out-of-line with comparable, nearby properties. Generally, it isn’t the homeowner’s problem if all the homes in the neighborhood have been valued too low. Because errors are so common, assessors and review boards routinely make adjustments when owners present them with solid evidence, such as a builder’s blueprint and recent photographs.
Still, fewer than one out of four taxpayers ever bother to try to correct errors, assessors say. One reason may be lack of nerve. “Most homeowners think they don’t have a chance in hell when they fight the government,” says Edmund Richards, president of Property Value Advisors in Austin, Texas, one of a growing army of “tax reps” who make their living fighting assessments on behalf of homeowners and businesses (and pocketing as much as half of any tax savings). Not long ago, Richards won a $7,000 tax savings for John King, a commercial builder who built his Austin home for about $250,000 on the border between two taxing jurisdictions, and wound up paying full taxes to both. “It was a mess,” King says.
Sometimes, the problem results from vagueness in local laws. For instance, Southern, who formerly worked as an assessor in Montana, says the definition of agricultural land was unclear. So when homeowners tried to claim their land was agricultural, he adopted what he calls the “three-chicken” rule: “If the owner had at least three chickens, and they weren’t just running around wild on his property, then I’d accept it,” Southern says.
Vague statutes are also a source of frustration for Harriet Wieboldt, the assessor for Greenwich, Conn. A few wealthy polo-pony owners in her jurisdiction are trying to get their estates reclassified as agricultural land, valued at $1,000 an acre–or even forest land, valued at $100 an acre–rather than residential property, which may be valued as high as $900,000 an acre. “One guy recently tried to pass off his riding mower as farm equipment,” she scoffs.
Nuisances that may affect home values are another gray area. Owners have successfully challenged assessments because of noises from nearby roads, a neighbor’s messy yard–and even bad smells. Charles and Conni Kimpston of Woodward, Iowa, for instance, got the $89,314 assessment on their home reduced by more than a third because they could smell the manure from a nearby hog farm. “It was pretty easy,” says Kimpston.
Assessors do have their limits. Anderson, the Iowa assessor, recently got a phone call from a woman claiming the valuation of her house should be reduced because of rumors that a former owner had murdered his mother there and buried her body beneath the house. “At first I was speechless,” says Anderson. “Then I lost it.” Of course, the claim didn’t survive.
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MORE ON THE INTERNET: Learn more about the Chicago area’s system of property tax assessment at chicagotribune.com/go/assess
BEFORE YOU DECIDE TO PROTEST…
So you think your property tax assessment is too high, and you want to challenge it? Here is some advice from experts:
– Learn the lingo. You may think you have 5,000 square feet and five bedrooms, but local assessors may not see it that way. Most don’t count below-grade space, even if it’s finished or your house is a split-foyer model.
– Double-check records. Many localities have begun to “outsource” periodic inspections of homes to data-collection companies. But these inspectors aren’t necessarily trained appraisers. “Anybody can be a data collector,” says Rollie Ehm, director of research at the International Association of Assessing Officers in Chicago. One harried data collector may be responsible for 1,000 homes or more.
– Don’t get emotional. You may think your taxes are outrageous, but that’s not the concern of the assessor, who only determines the value of your home. You’re more likely to win if you’re courteous and have marshaled impressive evidence, like recent sales of comparable homes, photographs and receipts for improvements. Don’t lie about remodeling work that was done without permits; if your case goes to court, you could be found guilty of perjury.
– Document your home’s flaws. “You may be embarrassed to let the neighbors know you have a bad roof, cracked pool or leaky plumbing, but all these things can reduce your home’s assessed value,” says Miami consumer advocate Frank J. Adler. When you challenge the assessment, bring estimates for the cost of repairs from at least two reputable contractors.
The Wall Street Journal
HOW TO APPEAL PROPERTY TAXES
Illinois has a multitier system of appeals for property tax assessments.
The first point of appeal in every Illinois county other than Cook is the county board of review. In Cook County, you may appeal first to the assessor’s office and then the Board of Review.
The Cook County assessor has a Web site that taxpayers may use to obtain appeal information or research property tax data (www.assessor.co.cook.il.us). Or contact the Board of Review at 312-603-5542.
Taxpayers who are not satisfied with their appeal at the county level can go one level higher, to the state Property Tax Appeal Board. Cook County taxpayers can contact the agency’s Des Plaines office at 847-294-4360. Outside Cook County, call the Springfield office at 217-782-6076.
In general, taxpayers may appeal an assessment as too high if they have recent or comparable sales figures that contradict the assessor’s market valuation; if they are being assessed for features that do not exist; if the home has sustained major structural damage; or if they can show a lack of equity or uniformity in the assessment versus comparable neighborhood properties.
Evidence that homeowners should present to bolster their case includes a photo of the property, proof of a recent sales price, a real estate appraisal, assessed valuations of comparable neighborhood properties, evidence of recent damage or a showing of vacancy or lost income on the rental units of two- to four-flats.
Steve Kerch
