COLUMN-Professional tricks to lower property tax assessment

Mon May 14, 2012 1:35pm EDT

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By John Wasik

CHICAGO May 14 (Reuters) - One of the best investments I made in my home this year was to hire somebody to prove that its value had fallen.

I know this sounds daft, but it resulted in a lower property tax bill. In our case, our taxes dropped by $1,000 to around $10,000 for the 2011 tax year. But we didn't challenge our taxes ourselves - we will pay a specialized property-tax consultant $250 - 25 percent of our tax savings - to appeal for us.

If you owe more than your home is worth and you want to stay in your home - or just can't sell - taxes are the one fixed cost you can have some success in reducing. (You can also try to refinance to a lower mortgage rate, but that can be difficult or impossible when you haven't any or enough home equity.)

To begin your home-assessment challenge, you can either hire a consultant to appeal your assessed valuation locally as my wife and I did, or do it yourself.

Part of this story is hardly satisfying. We knew our home value declined by at least $50,000 in the housing bust. Our estimated market value now is roughly what we paid for it more than a dozen years ago when we built it. Fortunately, due to a large down payment, we are not under water, although that equity value probably will not be coming back soon.

It's never made more sense to challenge your home assessment than it does now, although relatively few do. Some 11 million properties are underwater, meaning due to equity loss, the mortgages on these homes exceed the value of the properties, according to CoreLogic. Taxes will not necessarily track the depleted equity values, so you have to see if your local assessor has valued your property correctly.

Adding salt to homeowners' wounds is the ongoing, disheartening erosion of home prices in most cities: Over the past year, 15 of the 20 largest markets have experienced declines year-over-year through February, according to the S&P Case-Shiller Index. U.S. home prices are now at their lowest level since 2002.

The disparities between what homes are worth on the open market now and what they are assessed at for tax purposes can often be huge. The National Taxpayers Union estimates that from 30 to 60 percent of U.S. properties may be over-assessed, though only 5 percent of property owners challenge their assessments.

The gap between assessed and market value is even larger in some areas where assessors haven't accurately marked down home values due to the housing bust. That is one reason why there were more than 25,000 assessment appeals in my county in Northern Illinois last year, compared to 17,000 the previous year. You will have to do the research on your own to tell if you're properly assessed since each property is assessed differently depending upon home type and local market conditions.

Should you choose to go solo on your assessment challenge, you will need to find three comparable properties that have declined in value. Also check the property description with your assessor to see if it's correct. If the assessor erroneously included in your property record a finished basement or more living space or amenities than you actually have, you can correct it by contacting the assessor directly. That could result in an immediate assessment reduction.

Are you a senior citizen or a veteran? There's another way you might be able to save on property taxes. Check to see if you qualify for a special exemption. You also should have a homestead exemption for living in your home. You also may receive a break on recent improvements or energy-producing appliances like solar panels. While this is not part of the appeals process, it might be another way of saving you money.

Having tried appealing on my own in past years with meager success, I would recommend you hire a consultant. Assessors are really in the business of pooling money for taxing bodies; many of them are not homeowner friendly and assessors may guard the data and methods they use to value homes zealously. I discovered this years ago the hard way, and helped set up a nonprofit group in my area to inform homeowners on how to deal with assessors.

Most private consultants will take a percentage of your tax savings or a flat fee, or both. They should be experienced assessment professionals (mine worked in a township assessor's office) or a professional appraiser. You can find these consultants through a search engine. Enter "property tax consultants" for your county. We found ours through a neighbor's referral.

Keep in mind that an appraisal for a bank is not the same thing as a valuation for the assessor. It's a different animal and your assessor may not accept a current real-estate appraisal.

If you cannot reach an agreement with your local government assessor on a lower home value, then you can appeal at the state and county levels, although that typically involves more time and paperwork. Many appeal boards are incredibly backed up and if you miss their deadlines, you'll have to wait another year.

Here is another misconception you need to avoid: While you can lower your home's assessed value, it does not always translate into a lower tax bill. The other side of the equation is what rates local taxing bodies such as schools, fire districts and counties charge you. They can - and will - raise their rates to cover their budget shortfalls. So you can have situations where home values have plummeted, but tax rates go up to cover revenue shortfalls.

Begin planning your assessment challenge now. You will not only lower your total ownership expenses, but make your home more marketable. A lower tax bill than your neighbors adds considerably to curb appeal when it comes time to sell.

Editing by Linda Stern and Phil Berlowitz)

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