As real estate prices begin to go up again, look for sharp increases in property taxes to follow. It was interesting to watch a local county here in Central Florida actually double their county spending during a five year period in the last real estate boom. Property taxes are like a giant piggy bank for local politicians. Even if your tax bill is correct, it may be much too high already (even without any errors).
Three weeks ago I was contacted by one of our readers in the Chicago area with perhaps one of the most bizarre stories I have heard on the topic of property taxes. They just discovered, after fifteen years, that the county was assessing their home as being 500 square feet larger than it actually is. Yep, we did the math and they may have overpaid their property taxes by between $15,000 - $20,000 over the years. Even more troubling, the county admits the error but is only offering an adjustment in the most recent year's bill!
It is important to note that depending on your county rules you may have a very limited timeframe during which you can go back and challenge property tax errors. What makes matters even more complicated is that any reduction in a prior year's property tax bill will require that you also file an amended tax return for that year. Talk about opening up a can of worms. It would, however, be worth it if the amount was significant enough.
In some areas of the country, property taxes on a fairly modest home can now be $8,000 to $10,000 yearly. Even an error of just 10% - 12% on the assessment can be a difference of $1,000 or more!
5 Ways To Uncover Mistakes In Your Property Tax Bill
1. Check the public records for your home. Virtually all counties are now online and provide a simple means of pulling up homes by address through their property assessor's website. An easy tip off would be if the online property record shows that your house is larger than it actually is or lists features it does not have (e.g. pool, garage, etc...).
2. Similarly to #1 above, the assessed value of properties should also appear online along with the property record. Do a quick comparison between your assessment and those of neighbors with similar sized homes nearby. This is not an exact science, but will give you a sense of whether your assessment is within the margin of error or not.
3. Check with a local real estate agent to get a market analysis of the value of your home. A market analysis is not as involved as an appraisal, and many real estate agents offer this service for free or for a nominal fee.
4. Use an online valuation site such as Zillow.com to get a rough idea of the value of your home. I hear a wide range of opinions about sites like Zillow. Some people think they are somewhat accurate, while others consider their data to have substantial errors. Personally, I have found Zillow to be reasonably accurate.
5. Probably the most official means by which to determine the true value of your home is to hire an appraiser. Many appraisers are now even offering a service that includes assisting you in the appeals process.
Understanding Local Practices
Each county has its own unique practices and procedures for property tax assessments. For example, here in Central Florida our assessed value is usually about 80% of the actual market value. It would be important to know this to be able to determine if your assessed value is in line or not. This is why you can not simply consider the market value of your home in a bubble. You must also compare the 'assessed value' with other homes of a similar market value to your own to truly make a fair comparison. It is a huge mistake to simply give your county assessor the benefit of the doubt. Mistakes are common and it is well worth a few minutes of your time to double check your tax bill each year.
Challenging Your Property Tax Bill
There is no one template I can give you here as each county has its own procedures. I can share with you that most send out a proposed assessment several months before the bill is due. It is during this time that property owners can challenge the assessment. Many times disagreements on an assessment can be resolved informally by simply calling your property assessor and pointing out any errors. Some disputes ultimately end up in a hearing in front of multiple county officials where you can outline your case for a lower assessment. Your county tax assessor's office should have all of the details on this on their website regarding the appeals process.
If you have ever challenged your property tax assessment or found an error in your tax bill, please use the comments section below and share your story.
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