* Also See: Property Taxes: Fighting City Hall
JoAnn Palko has always> been proud of her family s house in Lake County, Ind. And justifiably so: The three-bedroom brick bungalow boasts hardwood floors, a new roof and soothing views of a quaint nearby park. But last summer, Palko gave a guest a tour of the house and, figuratively speaking, she trashed the place. That stove in the kitchen? It dates to Harry Truman s presidency. The tile floor? Just as old, and made of asphalt to boot. And as for the upstairs powder room, let s just say that in terms of space and amenities, it might remind a visitor of pioneer days.
Blame Palko s residential mood swing on the most recent property assessment; the county raised the house s value by 25 percent. So Palko has hired an appraiser to help her challenge the ruling by pointing out all the things that make her house look crummy. Bringing him on board cost Palko $300, but it may soon pay off. According to the appraiser, the county has overvalued the home by $50,000. For Palko, it s ammunition for her fight. This amounts to big savings, she says.
This summer, as the buying season is heating up, so is the battle over property taxes. Homeowners across the country are trying to figure out the secrets to a good assessment and by good, we mean lower. They re caught in a pinch that taxpayer advocates describe as an unholy love child of the housing crisis and the recession. Because of the struggling economy, counties and cities are facing some of the biggest budget gaps in history and since property taxes typically account for almost a third of a county s budget, many governments are gritting their teeth and raising them. Indeed, property tax revenues rose by 6.2 percent in 2008, compared with 2.2 percent in 2005, according to the National League of Cities. But home prices, of course, have plummeted at the same time, leaving homeowners fuming over what seems like an expensive disconnect from reality. According to the National Taxpayers Union, between 30 and 60 percent of taxable property in the U.S. is overtaxed. We re seeing assessments that don t make any sense, says Barbara Payne, executive director of Georgia s Fulton County Taxpayers Foundation.
Granted, Americans have been complaining about these taxes ever since George Washington hurt his property value by cutting down his father s cherry tree. But this time around, they re fighting back, appealing their assessments in numbers that local officials say are unprecedented. In Collin County, near Dallas, appeals increased 38 percent from 2006 to 2009, a period when taxes went up even as local home values stayed flat. And in Las Vegas s Clark County, where home prices have fallen more than 50 percent from their peaks, appeals have skyrocketed 885 percent over the past three years. Even former Bank of America CEO Ken Lewis has gotten into the act, appealing his Aspen, Colo., property taxes last year. Alas, he didn t get the $33,000 tab on his $19.6 million residence reduced but 20 percent or more of homeowners do win on appeal, experts say.
Nonetheless, as they jump into the fray, many rookie tax warriors are learning that appealing a tax can be just as quirky as any other facet of local politics. In many communities, assessors have great latitude in deciding a property s value. In Florida, they can add or subtract worth based on a home s proximity to a noisy nightclub; homeowners along the Nevada shore of Lake Tahoe are judged, and taxed, on the smoothness of their beaches. The bureaucratic labyrinth is generating business for a new crop of assessment-appeal experts many of them appraisers and real estate agents looking to make up income they ve lost in the housing slump. Their reward is typically an up-front fee or a percentage of the reduction, regardless of whether the taxpayer gets $400 axed off his bill or $4,000.
Some taxpayer advocates question whether these services are doing anything that consumers can t do for themselves. The appeal process, says Pete Sepp, vice president for policy and communications at the National Taxpayers Union, really is set up with the intention that homeowners can use it without third-party assistance. But that process also varies widely by state and town, and for homeowners who have watched hours of research turn into months of waiting, the temptation to get help is strong. With or without help, many of those taxpayers are in for a chess match that can feel like it s at a perpetual stalemate.
Too Few Assessors, Too Many Rules
Not surprisingly, there are a lot of ways a county assessment can go wrong. Culprit No. 1 might be overwork. Nationwide, there are about 2,500 property parcels for every assessment staffer, says Rich Almy, former executive director of the International Association of Assessing Officers. But budget cuts have taken that ratio to new highs in some locales; in Georgia s Fulton County, for example, the 36 appraisers now track almost 8,500 plots each.
That means it s possible that the assessor valuing your property will never set eyes on your home, relying on software and records instead. Some counties reappraise each year, others every 10 years, and all use a slew of different methods to estimate a home s value. Renovating in Wake County, N.C.? It s better to skip the extra sink and forgo the bidet, because assessors count bathroom fixtures instead of bathrooms to tally property value. Contra Costa County, Calif., puts a price on each tree in a homeowner s yard. And in Seattle s King County, assessors assign value to a condo s parking spaces separately since, theoretically, a family could sell the asphalt underneath their cars if they were starved for cash.
It s no wonder, then, that homeowners want help. On the outskirts of Atlanta, Larry Singleton drives through Towne Lake Hills, a subdivision of more than 1,000 homes. To an outsider, the brick-and-stucco, two-car-garage houses all look the same. But while the home of Singleton s newest client may blend right in, this five-bedroom, golf course view abode has a tax assessment that the owner thinks is out of sync with its neighbors . Singleton, cofounder of the company My Property Tax Appeal, stops only long enough to get out of the car and take a picture; he ll be working his magic at his office.
Back in his basement lair, Singleton pulls up a real estate database and scrolls through recent sales, looking for homes similar enough to his client s to build a case on. He throws out one home that doesn t have a basement (his client s does) and another that s too new (his client s home was built in 1995). Wielding a calculator and a pencil, he settles on three sales that prove his point. At $109 per square foot, his client s home is overvalued, because the average-square-foot price for a comp home totals $98. Just then, his eye catches one more sale that brings the average price down to $89. Bingo. We re massaging the numbers, Singleton says. In under a half-hour, Singleton has put together an appeal that, if it succeeds, will save the home-owner $521.05 in taxes this year. And 30 percent of that will go to Singleton.
Go up the price scale, and the process becomes a lot more complex. Jude Rasmus, cofounder of Real Property Tax Appeals Group in Marietta, Ga., says appeals are like a chess game you try to guess what your opponent (the assessor) thinks and then develop countermoves and gambits. Recently hired to appeal the tax on a $2.6 million, 9,000-square-foot home on the grounds of the Atlanta Country Club ( he s nuts to have paid that, she quips about her client), Rasmus draws up a line of attack: There are probably fewer than five homes in the county that sold in the past year for comparable amounts, so she can argue that those sale prices set the market value.
It doesn t take long for her to confirm her hunch by combing through sales records. The highest recent sale: $1.85 million, for a home that touts smart-house technology, a nanny suite and a 10-car garage amenities her client s home doesn t include. To her, that looks like a trump card. Still, she admits, there s no exact science to valuing properties.
How Helpful Is the Help?
It s the lack of science that has some critics questioning the value of hiring a white knight. Assessment pros acknowledge that some data they use is readily available to the public. Plenty of real estate Web sites provide free comp-sales information: On Zillow.com, for example, an observer could learn that the estimated value of the property Singleton worked on is $247,500 lower than the county s $264,200 valuation but not as low as Singleton s estimate. (Zillow says that, in tax disputes, a Zestimate isn t likely to be as persuasive as an appraisal.) What s more, assessors say the data homeowners use to make their case is sometimes irrelevant; in Fulton County, for example, details like the number of bedrooms have no bearing if the square footage is right and the quality grade is right, says Burt Manning, the county s chief appraiser. There s also the chance that an appeal might lead to a tax increase; 1 to 2 percent of appeals on Manning s turf, for example, end in homeowners having to fork over more money.
Whatever tools they use, a lot of homeowners are up against a hard reality: Local governments aren t about to give up easily on tax revenue they desperately need. In 2007, Maryanne Ingemanson was astonished when Washoe County, Nev., valued her Lake Tahoe property at $6.4 million about double what she expected bringing her annual property tax tab to $78,000. She says she appealed and spent hundreds of hours preparing documents for her hearing. Among her findings: The county had decided her pristine sandy beach was worth $1.3 million more than her neighbor s rocky beach. (Washoe County assessor Joshua Wilson says sandy beaches command more market value.) The county eventually lowered the assessed value of her spread by more than $2 million. But Ingemanson, not satisfied, has hired an attorney (price tag: $30,000 so far) to argue her case. The county probably hopes I either run out of money, move or die, she says. As she nears the halfway point of year three, one of those scenarios just might come to pass.