They say there is always a silver lining in every dark cloud. In our current economic recession, it is getting harder and harder to find any silver linings. During the last three years, real estate prices have plummeted. What is interesting to note, is that despite much lower real estate prices many people have not seen any reduction in their real estate taxes. Today, I want to discuss the step-by-step process of determining if you are eligible for a tax cut based on the current market value of your home.

Your county real estate taxes pay for essential services provided by your local government. Most of the cost of your local school system, fire department, police department, and other county services are paid through the collection of real property taxes. The amount of your tax bill is based on a calculation of the value of your property as a percentage of the current year's county budget.  If the value of your property is on the rise, your tax bill will follow closely behind. What seems unfair, is how slow the same tax assessments are adjusted when the value of a property is declining.

1. What Is Your Assessed Value?

Depending on where you live, the process of determining what your tax assessment may slightly differ. In most parts of the United States, this information is readily available online. If your county real estate records are online, chances are that your tax assessment is online as well. This is usually as simple as going to your county website that maintains these records.  If you are unsure of whether or not your county real estate records are available online, you can call your local county offices and make an inquiry. The worst-case scenario is that you may have to make a visit to your county offices to access the information manually. The other way to find out your tax assessed value, is to dig out your last year's tax bill. Keep in mind, however, that your home may have been reassessed since the last time you receive a tax bill. If your home has been reassessed, it is likely that you should have received the notice of assessed valuation by mail.

2. What Is Your Home Really Worth?

Many people find it emotionally difficult to accept the notion that their home may be worth less today than it was in the past. The reality is, however, that for most people this is the case. There are a myriad of ways that people use to determine the value of a home. Most of these methods are not based on generally accepted appraisal techniques. For example, you can't simply pick the nicest home in your neighborhood that recently sold and conclude that your house is worth just as much. There's quite a bit more involved in determining the value of a home than just anecdotal evidence. The standard real estate appraisal will consider the three most recent sales of similar homes within the closest proximity available to the subject property (known as comparables). The idea is that if we use the average of three sales of similar homes, we can come up with a good ballpark value. Using recent sales prices from public records, professional real estate appraisers can usually arrive at an approximate value plus or minus about 5%. One option that you have to determine the current value of your home is to hire an appraiser to do a full blown appraisal. This is probably not necessary, since it will likely cost you $300 or more. Another option, is to contact a local real estate office and ask for a market valuation or a broker Price opinion. These less formal appraisals are available either free or for a nominal cost for many local real estate agency. And even lower-cost option, is to use an online service to determine the value of your property. The service that seems to have the best reputation is Zillow.  There are competitors to Zillow, but most real estate professionals consider this the best free online source of real estate values.

Another step in the process is to try and figure out how aggressive property valuations are by your local county tax assessor. Your county tax assessment is not the same as your appraised value. In Florida, most properties are worth at least 20% more than the tax appraisal. It has become somewhat of an understanding in this part of the country, that the true value of a parcel of real estate is about 20% higher than the tax assessment. For example, if your home is legitimately worth $200,000 on the open market your local tax assessor may only assess a tax value of $160,000 to $170,000 (Volusia County Florida). Using a little reverse engineering here, what you can do is to go on Zillow and look up the value of your home and other similar homes within a mile or two radius. Next, look at the tax assessments of several properties that you consider comparable to your own. Do a quick pen and paper analysis to determine what percentage of Zillow value represents the typical tax assessment. For example, if you determine that tax assessments are running at about 85% of actual market value, you can quickly do the math to determine whether your tax assessment may be too high.  The other way to analyze this is to do a side by side comparison of the your tax assessment compared to the assessments of simliar homes in your neighborhood.  This may be a simpler more direct approach.

There are some rather odd conventions from one county to the next throughout the United States. For example, in Cook County Illinois, tax assessments are based on 16% of a home’s market value. This means that a $100,000 house would have a tax valuation of $16,000. I really don't understand why counties go to so much trouble to make things this confusing. In any case, you should be able to quickly find out what the methodology is in your particular county. Just for example, here are a links to the county tax assessor's office for Cook County Illinois as well as Volusia County Florida.  You will quickly see the major differences in this whole process from one part of the country to another.

3. How To Appeal Your Tax Assessment

If you believe that your tax assessment is too high, ask your county tax assessor what the process is to file an appeal. Every county will have a slightly different system, and may involve a hearing where you are able to appear and present your case for a reduction in your tax assessment.  Some counties are very progressive. For example, Cook County Illinois has an online appeal option. This allows you to challenge your tax assessment by submitting an online form. While I like to make these articles practical, and give everyone a step-by-step, I just can't do that in this case because the information varies so much from one county to the next. My best advice on how to find out what the appeals process is in your area, is to either call or go to your tax assessors office and simply ask. Alternatively, you may be able to find this information on your tax assessor's website. 

In researching this article, I learned that nearly 40% of tax assessment appeals are successful. This was a much higher success rate than I expected to discover. You can appeal your tax assessment based on an over-valuation or an error in the description of your property. Most counties require you to file an appeal within a specific timeframe of receiving your notice of assessed value. This is typically a 30 to 60 day window that you have to challenge the amount of your tax assessment.

Have you had your taxes lowered through an appeal?  Post on Twitter and follow with #propertytax and let’s start a discussion.  Alternatively, use the comments section below.

Helping you make the most of God’s money!

James L. Paris
Editor-In-Chief ChristianMoney.com 
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