During the property tax season last year Eric Burnham of Canton, Michigan couldn’t understand it. The tax assessor for Canton pegged the value of his home at $272,000, up $7,000 from the year before, despite the fact that the local market had already gone south. Burnham fought back - and won.
He may soon have a lot of company. Property taxes have risen in the Detroit suburbs at more than twice the rate of inflation this decade. When home prices were going up at least that much, it was hard to complain. Besides, since many locales re-assess properties to their "true market value" only every few years (in some cases even less frequently), an owner in a particularly hot neighborhood made out. The value of their property rose faster than one across town, but the tax burden didn’t shift.
Oh, how times change. Now every major national index has recorded a drop in home prices, and plenty of once sizzling markets have gone stone cold. That doesn’t mean homeowners in our ciities and townships in Southeastern Michigan can expect a friendly note from the tax man lowering their assessment. The reason taxing authorities don’t make it extrememy easy to lower your taxes is that if they reduced everyone’s assessed value, the tax rate would just have to go up to make up for the lost revenue.
Nevertheless, the pullback in prices could give you an opportunity to ease your property tax squeeze. In my experience very few homeowners try to appeal assessments even though i see a vast majority of properties that are overvalued by assessors. So if you file an appeal that’s based on factual sales and valuation data, you’ve got a good chance of success as long as most of your city doesn’t do the same.
The bottom line is that if homeowners aren’t focused on what has happened in their marketplace, they are paying too much in property tax..
Depending on how far you’re forced to take an appeal, expect to spend from five to 20 hours on it. Most of the time you won’t need a lawyer. And with potential payoffs in the thousands over many years, why let it slide? If your assessment has you banging your head against the desk, follow these steps to bring down your bill as painlessly as possible.
1. Learn your system
Taxing authorities use different methods to calculate home values. Some look at recent sales of similar homes. In rural areas where sales are few, they might estimate the cost to rebuild. Others use some combination of methods. Call your assessor’s office and ask how it pegs values. In some locales your tax liability is based on a percentage of your property’s estimated value. You’ll want to know what that percentage is so you can figure out whether the actual value the assessor is assigning to your home is fair.
2. Get your assessor’s evidence
The assessor didn’t pull his estimate out of a hat, even if it seems that way to you. Visit the assessor’s office and ask for the evidence used to value your home. Get your home’s property detail printout, which lists basic details like lot size, square footage and number of bathrooms.
3. Make sure the description is right
When municipalities or counties re-assess property values, they typically hire an outside contractor who looks at hundreds or thousands of homes in a tight time period. The appraiser has to come up with shortcuts. Three vent stacks on the roof? That must mean three full baths. Never mind that an upstairs laundry room could be the culprit.
The assessor’s file should contain a worksheet that the appraiser filled out during inspection with addresses of homes he compared with yours. That was a key to Burnham’s success. The appraisal that was done on his house that was built in the 70’s was valued as though it was comparable to homes in a nearby subdivision that were similar in size but 25 years newer with lots of modern amenities. In the end his assessment was lowered by $16,000, saving him around $165 a year.
4. Build your case
You won’t have much time to file an appeal, generally 60 days or less from the time your annual tax assessment was mailed. For the Detroit western suburbs the appeal process usually takes place during late Februray to early April. Call your city assessor to find out the times for the appeal process. In most you will have to make an appointment. You can’t just show up in the appeals board with a newspaper article showing price declines and expect to win.
If the issue isn’t a simple error on your property card, you’ll need to arm yourself with recent comparable sales or assessments that show your house has been valued too high. You can look up your neighbors’ home valuations at the assessor’s office. The easiest way to come up with comparable sales is to ask your real estate agent for help. We at "The Bittinger Team" has been providing this service for our clients for years.
Your ideal comparable homes will be of the same square footage and age as yours and sit on almost the same size lot as close to yours as possible. To make your case you’ll need at least three sales - more is better - from around the time of your assessment. Your agent might charge you a $50 to $100 fee, but the expertise is worth it.
Take a critical eye to the homes and make sure there aren’t circumstances that an assessor could use to explain a huge difference. Is one of your comps backing up to a commerical strip mall? Was one a distress sale because of a foreclosure? Did you just put all new windows, finish the basement, and replace the roof on your 30-year-old home?
Put together a spreadsheet listing the addresses of the comparables, the sales prices and dates, the price per square foot and a description of what makes the homes similar to or different from yours. Finally, to complete your homework, drive out to the properties and take photographs of the exteriors.
5. Meet the assessor informally
You will usually meet with an appeal board that is arranged at an appointed time at the assessor’s office or township hall. Go over the evidence you found in support of a lower value. Facts and figures given in a cool professinal manner works best. The appeal board members should not be looked at as your opponents. They are there to listen to your presentation, ask questions, and help you fill out your appeal with information you may not have supplied. They are usually taxpayers just like you and want to be fair in every case.
Attitude is important. You’re showing the assessor how his appraiser messed up. Don’t add to his defensiveness by tossing verbal grenades like "I pay your salary." If the assessor won’t budge, make him explain why. Take notes: He’s handing you his battle plan for the formal appeal.
6. File the appeal
Usually this is with a county board. Hand deliver it and get a receipt or use certified mail. Within a couple of weeks you should get a notice acknowledging receipt, but depending on your city’s size, you could have a long wait for a hearing.
Most appeals are heard over the course of a couple of weeks. Before your day arrives, attend a hearing to get accustomed to the proceedings. Certain board members might raise the same objections all the time. So make sure you’re ready to answer those questions.
Prepare visuals with photos of your home and the comparable homes, then write out and rehearse your presentation. Keep it short and to the point. Brevity will score you points and leave time for the board to ask questions.
7. You lost?
First, you’ll likely appeal to a state agency. If that fails, you’ll probably have to go to court. At this stage of the game you’ll need help from a lawyer and probably an appraiser. That needn’t cost a fortune. You can retain a lawyer for a contingency fee that varies based on your potential tax relief. An independent appraisal will cost $300 to $400 or so.
The state, which will be handling hundreds of such appeals, wants to end the dispute as quickly as you do. Before trial, these offices knock out as many settlements as they can. They’re going to voluntarily give at least some relief in 95% of cases.
In any case we have found it is worth it for homeowners today to go through the effort of trying to reduce your tax assessments. Even if you lose, just think of it as a learning experience.
